Borders gets a conditional lifeline:
Borders Gets $550 Million Loan Commitment
By MICHAEL J. DE LA MERCED and JULIE BOSMAN
DealBook
New York Times
January 27, 2011, 7:33 pm
Borders Group, the struggling bookseller, said on Thursday that it has received a commitment from GE Capital for $550 million in refinancing — so long as the company meets several requirements, including signing up agreements with publishers to convert delayed payments into loans.
The potential refinancing from GE Capital is meant to help alleviate pressure on the bookseller amid continued declines in book sales. Over recent weeks, Borders has laid off employees and lost top executives.
But Borders is exploring other alternatives, including an “in-court restructuring” — referring to a potential bankruptcy filing — its president, Mike Edwards, said in a statement.
“We view the refinancing route as the most practical, efficient and beneficial to all parties, and we are working with our vendors in this regard,” Mr. Edwards added. “At the same time, given the current environment surrounding Borders, and in order to assure that the company can pursue its efforts to position itself to properly implement its business plan, it is prudent as well for Borders to explore alternative avenues.”
To secure the GE Capital senior secured financing, Borders must take several steps to improve its finances. Key among these is lining up $125 million in junior debt financing, either by converting vendor payables or from other sources. In a series of meetings, Borders has sought to convince publishers to accept what amounts to a loan for delayed payments.
The goal has been for publishers to take up one-quarter to one-third of Borders’ reorganized debt, but the exact percentage has not yet been determined, people briefed on the matter previously said.
But publishers said earlier this week that they remained hesitant to accept Borders’ preliminary offer. Several publishers who have negotiated with Borders as a group said that the bookseller had still not presented a viable plan to move the company forward.
Borders had hoped to persuade publishers to accept the company’s debt conversion proposal by Feb. 1, the people briefed on the matter previously said. As of Thursday evening, the bookseller had yet to formally ask publishers to commit to the plan.
So far, neither of Borders’ biggest shareholders — the company’s chairman, Bennett S. LeBow, and the hedge fund manager William A. Ackman — has indicated a willingness to put new money into the bookseller, these people said. Mr. Ackman disclosed in a regulatory filing last month that he would be willing to loan Borders up to $960 million to finance a merger with Barnes & Noble, the company’s bigger rival.
GE Capital’s other requirements include successfully syndicating $175 million of the $550 million financing and Borders’ devising a store closure plan.
There is no hard and fast deadline for completing those requirements, one of the people briefed on the matter said.
Shares in Borders, which had fallen 4 percent on Thursday to 81 cents, jumped more than 35 percent in after-hours trading. They have fallen 14 percent over the past 12 months.
Borders has already been working with advisers on reorganizing its finances, including the investment bank Jefferies & Company.
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