Thursday, April 10, 2008

Revisiting Borders

On March 20th, I did a post here about the steps the Borders Group was taking to keep its head above water.

I explained that the slowing economy was making it difficult for Borders to find credit. Pershing Square Capital Management, Borders' largest stockholder, agreed to lend $42.5 million and also agreed to buy the company's subsidiaries in Australia, New Zealand, Singapore and its Paperchase subsidiaries for $125 million if Borders was unable to find another buyer.

This week Borders was back in the news. Tuesday's Shelf Awareness reported that Borders had met with Pershing Square and revised the terms of the above deal as follows:
  • The $42.5 million senior secured loan will have a 9.8% interest rate rather than the original 12.5%
  • The backup purchase offer for Borders' operations in Australia, New Zealand and Singapore, its interest in the U.K. and Ireland Borders stores and PaperChase has been raised by $10 million to $135 million. The company believes that the business is worth more than this amount . . .
  • The number of warrants allowing Pershing Square to buy Borders stock at $7 a share has been reduced to 9.55 million from 14.7 million and the term has been reduced to 6.5 years from 7.5. However, if Borders does take advantage of the backup purchase offer or a "definitive agreement relating to a change-of-control of the company is not signed by October 1, 2008," or the company terminates the strategic alternatives process, Borders must issue another 5.15 million warrants to Pershing Square.

Yesterday, Publishers Weekly reported that Borders has found another investor.

Gerald Catenacci disclosed in a filing that funds he is associated with now own just under 3.4 million [shares] of Borders, giving it a 5.7% stake . . . News of the investment coupled with the announcement that Borders had completed its financing agreement on better terms than originally agreed to drove up the retailer's languishing stock by nearly 7%, and it closed Tuesday at $6.60 per share.

Stay tuned . . .


Angela said...

love ur blog!

Maya Reynolds said...

Angela: Thanks so much.