I was just wondering, how close are we really to bankruptcy? A few years ago I would have laughed at a question like that myself, but lately, all signs point to Barnes & Noble not being able to right its course. And if we continue the way we have, there is no saving us.
Thinking like this makes me sad, but I like to be a realist.
I have no real financial experience myself, but BN will go bankrupt, basically, when it runs out of money and can't find financing to stay afloat. If the company can't meet its basic payables (like payroll, rent, etc.) it draws on what sounds like a pretty substantial line of credit it has set up--which isn't unusual, as most companies today rely on short-term paper to meet these costs. The difference is, other companies are waiting for receivables to come in, and use that to pay back the short-term loans, BN is drawing income from the line of credit, and probably paying a lot of interest on it.
The problem starts when the guys who are providing the line of credit realize that BN isn't likely to be able to pay them back. When that happens, the financial people in New York are going to scramble to find somebody else to loan them money, which possibly they'll find, but the interest they'll pay will be a lot more. With some companies, there is a break-up value to consider, like an airline that's no longer profitable but has a lot of capital tied up in airplanes, which can be sold to somebody else. When a company is losing enough money quarter to quarter, sometimes it's worth only the breakup value, and the company closes its doors and gets broken up.
Alas, BN really doesn't have much in terms of capital. All the stores are leased (AFAIK), and while these leases might have some value, there's certainly no shortage of commercial real estate in most of America. BN might own its distribution centers, which might be worth something, or they might be leased, I have no idea. Really, apart from the merch in the stores, I don't think that BN has much real value at all, apart from the brand and the name.
So, really, there's no way to tell when/if the company is going bankrupt. If nothing much changes with BN's business plan, and they don't start logging profits, there's probably not much light at the end of the tunnel.
It would be helpful if someone who understands finance well could give a detailed answer.
How close ?
Closerthanthis.