Borders Again Delays Payments To Vendors, Also Skips Others
2011年1月31日 - 8:40AM
Dow Jones News
Borders Group Inc. (BGP) said Sunday evening that it delayed
more payments to vendors, and this time around also didn't pay some
landlords and "others" it owes, as the troubled bookstore chain
hovers precipitously between a highly conditional rescue financing
and bankruptcy protection.
Borders has been selectively skipping payments to certain
vendors since at least the end of December, and has over the past
month closed a warehouse, parted ways with a pair of executives and
trimmed headcount at its Ann Arbor, Mich., headquarters, to name
just some of the tough choices the struggling retailer has faced.
It said last week that it secured a financing commitment from
General Electric Co.'s (GE) GE Capital arm, but the financing is
contingent on several, far-from-certain events, and Borders added
that its circumstances dictate that it continue to evaluate other
alternatives, including an "in-court" restructuring.
Sunday marked the first time Borders said landlords and "others"
would also share in its woes. This news, which it said will
"maintain liquidity while it seeks to complete a refinancing or
restructuring of its existing credit facilities and other
obligations," shouldn't shock; one of the conditions of the GE
Capital financing is that Borders finalize a store closure program
that sees it identify and close underperforming stores "as soon as
practicable."
As of the last time Borders disclosed its store count, it
operated 507 Borders superstores, plus 169 other stores under the
mostly mall-based Waldenbooks and Borders Express brands, plus
stores in several airports.
In addition to the store closures, before GE Capital grants the
$550 million senior secured credit facility, one or more other
institutions will have to syndicate out $175 million of the loan,
plus Borders will need to secure another $125 million of junior
debt financing from vendors and other lenders. And vendors,
landlords and other will need to agree to "supporting financing
arrangements" that GE Capital approves.
At least two book publishers told The Wall Street Journal last
week that they wouldn't accept interest-bearing promissory notes in
exchange for missed payments.
Lastly, even if all the other conditions are met, GE Capital
still needs to conduct "business, financial and legal due
diligence," and Borders can't have any material adverse changes
come along between now and then.
These developments are likely trying for tobacco magnate Bennett
LeBow, who infused money into Borders last year to become its
largest holder on a fully diluted basis and installed himself as
the chairman and chief executive. Also potentially on the hook is
prominent hedge-fund chief William Ackman, who was Borders largest
holder before LeBow, and could lose most or all of the roughly $160
million his Pershing Square Capital Management has spent on Borders
stock over the years.
Ackman once invested heavily in larger rival Barnes & Noble
Inc. (BKS) and unsuccessfully pushed for a combination of the
booksellers. He recently suggested he would help finance a takeover
of Barnes & Noble by Borders, despite Borders's struggles, but
last week in a CNBC television interview Ackman quipped that the
best Borders strategy now might be to sell the stock short.
"I assume they are negotiating with publishers, while preparing
to file if necessary," Ackman said in an e-mail. "Nothing new."
Borders spokeswoman Mary Davis declined to comment beyond the
press release, and the typically tight-lipped LeBow couldn't be
reached.
Shares of Borders closed up 4 cents, at 85 cents on Friday.
-By Maxwell Murphy, Dow Jones Newswires; 212-416-2171;
maxwell.murphy@dowjones.com
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