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Posted on Thu, Oct 20, 2011 : 5:30 p.m.

Unused gift cards boosted Borders' revenue in final days

By Nathan Bomey

(This story has been corrected to reflect that gift cards were accepted after July 18 liquidation announcement.)

Defunct Ann Arbor-based book store chain Borders Group Inc. recorded a surge in revenue in the final month of its existence — but it wasn't because of a new wave of customers.

Borders reported only $3.3 million in sales during the period from Aug. 28 to Sept. 24, spanning the final liquidation of the chain's network of stores.

But it recorded $156.2 million in "other revenue" — which, according to a bankruptcy filing, included the "write-on of all unredeemed gift cards issued prior to" the company's Chapter 11 bankruptcy filing in February.

Many retailers don't treat gift card sales as revenue until they're spent — but in this case, all of Borders' stores are closed and competitor Barnes & Noble, which acquired Borders' intellectual property, isn't accepting Borders gift cards.

In effect, Borders gift cards are now useless, allowing the consultants who now run Borders' bankruptcy estate to record unused gift cards as revenue. Those funds will be distributed to the company's top creditors.

In 2008, the Michigan Legislature passed a law requiring newly issued gift cards to last at least 5 years before expiring. But that doesn't apply to gift cards issued by companies that have filed for bankruptcy, according to the Michigan Attorney General's Office.

Bankrupt companies are not obligated to accept gift cards — although Borders accepted them through the end of its liquidation.

Many retailers that file for bankruptcy transfer gift card funds "to their general funds, maintaining no reserve to make good on the cards, as home goods retailer Linens ’n Things acknowledged in its bankruptcy filing," according to Consumer Reports. "As a result, when a company seeks bankruptcy protection, gift-card proceeds become part of its assets, and claims by secured creditors come ahead of those filed by gift-card holders and other so-called unsecured creditors."

Contact's Nathan Bomey at (734) 623-2587 or You can also follow him on Twitter or subscribe to's newsletters.



Tue, Mar 6, 2012 : 5:21 a.m.

This was most upsetting in that I, like many other teachers, recieved a gift cards one month before the liquidation. The stores said Barnes and Noble acquired them and the cards could not be spent in the stores, only spendale online,. B& N never saying they were out of business. As a teacher who recieves valuable books as resources for a classroom, I also was left with $$$ worthless plastic by well intentioned parents and community organizations trying to help our schools. More disheartening is that our community gave many gift cards to students who cant afford books to encourage literacy and now they dont have books either. Unbelievable and sad! There needs to be laws on protecting consumers on this as this has been done by many business where they build up the revenues with promised services, then go belly up with a fat wallet - MD Spa chain did the same thing!

Don R

Wed, Dec 7, 2011 : 9:54 p.m.

OK, I think I have this figured out. Borders went out of busines with millions of $$$ of unredeemed gift cards sitting out there and Barnes and Nobel bought them out without accepting the liability of the unredeemed cards. Since I have in my posession a now worthless piece plastic issued by Borders in the amount of $25 that was given to me two years ago as a present and which is now worthless since B & N has stated that they will not honor them, what makes Barnes and Nobel think that I will ever shop iin one of their stores while I am still alive? What a bunch of knuckleheads.......

Susan Aikens

Fri, Oct 21, 2011 : 3:27 p.m.

You should have credited Judey for correcting the factual error in your report.


Fri, Oct 21, 2011 : 11:04 a.m.

Something makes no sense. Unless Borders retained the CASH for these cards when they were purchased, recognizing REVENUE would just be accounting, although I guess it is possible that by doing so it results in moving bankruptcy payout from one party (unsecured creditors) to another (secured creditors), but I question if there would be enough to pay anything to unsecured creditors anyway. Regardless, the honoring of giftcards during the bankruptcy use very unusual. The firms that performed the liquidation likely made that arrangement as part of their bid to get the job, either getting agreement to be paid for card usage or knowing that redemption would be low. What this shows is the number if people that just threw away money by not using their giftcards. Giftcards are wonderful for retailers but awful for consumers. Give CASH. It allows recipients to use it as they please, never expires, and has no fees. We used our only Borders card months before they filed. Bought a book for much more than Amazon charged, and left less than $1.00 on the card.

Judey Kalchik

Fri, Oct 21, 2011 : 2:28 a.m.

Stores accepted gift cards throughout the liquidation process. Please let me know if I can assist you in gathering the facts for the update of this column by sending you an email from Borders, dated September 12th, alerting customers that there were 5 days left to use gift cards. I will be glad to forward it. If I can take your statements regarding gift-card-law as true (although, who knows?) then it seems Borders and the liquidators that purchased them went above and beyond to ensure that customers didn't get stuck with useless plastic. That makes me happy. That is the way I remember the company I was so proud to represent, the way I remember them treating their customers. So, I suppose, thank you for this column, no matter the errors it contains. I am disappointed, but not surprised, that you did not base your statements on facts in this column regarding Borders. I am, however, pleased that it must be a slow news day, so that you turned to your favorite whipping-boy topic: Borders. Whatever, Nathan, will you do for news next year?

Nathan Bomey

Fri, Oct 21, 2011 : 3:01 a.m.

Judey -- you are right. I double-checked, and, yes, gift cards were accepted through the end of the liquidation. My apologies for the error — it has been corrected. Thanks for reading.