Nebraska Book Co, one of the largest college bookstore operators, filed for bankruptcy protection in Delaware to restructure its debt. The Lincoln, Nebraska-based company operates about 280
bookstores on or near college campuses, and is a large wholesaler of
textbooks.

Nebraska Book had $657.2 million of assets and $564 million of debts as
of February 14, according to a petition filed on Monday with the U.S.
bankruptcy court in Delaware.

The filing said sales have been on the decline as more customers shop online.

But Nebraska Book reached an agreement on a restructuring with the support of more than 95 percent of the holders of its 8.625 percent senior subordinated notes and more than 75 percent of its 11 percent discount noteholders. The company said in a statement it will restructure about $450 million in loans and bonds of its parent, NBC Acquisition Corp., and affiliates.

“This agreement solves balance sheet issues we have been addressing for months,” President Barry Major said in the statement. “We are clearing a path toward continued growth.”

“It will remain business as usual,” with little to no effect on operations, he added.

Nebraska Book started as a single bookstore in 1915 near the University of Nebraska college campus, according to court documents.

The company currently has about 280 stores on and off campus. It also has one of the largest wholesale distribution networks of used textbooks, supplying college bookstores with more than 105,000 different book titles and selling more than 6.3 million books a year.
‘Stagnant†Profitability

In a court filing, Chief Financial Officer Alan Siemek said several
years of declining or stagnant earnings left Nebraska Book unable to
refinance debt maturing in 2011 and 2012, according to Reuters.

“The
relative decline of (the debtors) off-campus stores performance is
due to a combination of on-line textbook sales and, more recently,
online rental programs, which have been successful in attracting value
shoppers, the debtors primary customers in the off-campus stores,”
Siemek wrote.

Nebraska Book has proposed a restructuring that would turn control of
the company over to noteholders, court papers show. “The plan is a
remarkable result under the circumstances and will result in the highest
possible recoveries for all stakeholders,” as well as a “full recovery
by trade creditors and other general unsecured creditors,” Chief
Financial Officer Alan G. Siemek said in court documents.

Under the proposal, $175 million in 8.625 million senior subordinated
notes would be converted into $30.6 million in secured notes, $120
million in unsecured notes and 78 percent of the new equity, according
to court filings. Holders of the $77 million in 11 percent discount
notes would receive the remaining 22 percent of the stock.

Secured lenders, owed about $26.3 million, and secured noteholders, owed about $200 million, would be paid in full with cash.

As part of a pre-bankruptcy plan, Nebraska Book said most holders of two
debt issues agreed on a restructuring for $450 million of its loans and
bonds, eliminating up to $77 million of debt at the parent level. It
also lined up $200 million of financing to keep operating in bankruptcy.

Nebraska Book lost $98 million in its latest fiscal year, mainly
because of a goodwill writedown, on revenue of $598 million.

The textbook retailer has adapted its business strategies, catering to
the changing market by expanding its online presence in recent years as
well as developing a textbook rental program, court papers indicate.

The company has more than $20 million of cash on hand, and has
commitments for a $200 million loan to help fund operations while in
bankruptcy, according to court documents.