Borders gets a reprieve
America’s second-largest bookstore chain, Borders Group Inc. – rumored to be at death’s door for quite a while now — has gotten a financial lifeline from its largest shareholder, Pershing Square Capital Management LP. According to a Wall Street Journal report by Kathy Shwiff, Pershing granted the bookseller another year to repay its $42.5 million loan, at the same interest rate of 9.8% (which, as Shwiff notes, is “substantially below market for comparable financing”). In return, Borders agreed not to compel Pershing to buy its U.K.-based Paperchase gifts and stationery business, as per the original terms of their agreement.
“The extension of the loan gives us some necessary breathing room, which is important in the current economic environment,” said Borders CEO Ron Marshall, who was essentially chosen to run the company by Pershing. “We are also pleased to retain Paperchase, which is a successful and important business throughout the U.K. and other markets as well as in our Borders superstores throughout the U.S.”
It capped a tumultuous few months for Borders, which ousted its chief executive in January, cut 12% of its workforce in February, and earlier this month said it would be cutting another 3%. Plus, Pershing had already extended the deadline twice this year.
But it was welcome news to publishers, who fear the loss of such a large competitor in the market, not to mention its hundreds of stores. Wall Street seemed pleased, too: Borders shares, which have fallen 95% in the last year, were up 3.2%, and continued to trade after hours.
Dennis Johnson is the founder of MobyLives, and the co-founder and co-publisher of Melville House.