Borders not going out of business…. yet….

….or so it currently appears.

Pershing Square has agreed to a one year extension of the loan agreement.

From the press release:
ANN ARBOR, Mich., March 30 — Borders Group, Inc.and Pershing Square Capital Management, L.P. today announced a one-year extension of the $42.5 million senior secured term loan from April 15, 2009 until April 1, 2010. The loan will be extended on its current terms, including an interest rate of 9.8%, which is substantially below market for comparable financing. At the same time, Borders Group is resetting the strike price on Pershing Square’s 14.7 million warrants to $0.65 per share, and the company will allow its option to “put” its U.K. based Paperchase gifts and stationery business to Pershing Square to expire.

Could make next year’s April Fool’s Day interesting….

16 responses to “Borders not going out of business…. yet….

  1. This kind of thing always leaves me a little sad because, well, it’s so obvious that it’s just extending the death process. It’s like putting a comatose 100-year-old on life support. It mostly comes down to someone not wanting to admit that it’s over… or in this case, more like a lot of people perhaps not wanting to admit that yes, you can go broke underestimating the tastes of the American public.

  2. As much as I like Borders and don’t want it to go under (I actually favored my local Borders over the B&N, even if the selection wasn’t always as great), I’ve got to agree with here. It’d be great if the economy picked up and Borders was able to recover from its financial woes, but it seems unlikely at this point. You’re right, next April Fool’s Day could be very interesting (and sad).

  3. I feel bad for Borders but I’m not sure it would be such a terrible thing it went under. The problem, as I see it, is Amazon. See, I’m a big supporter of local businesses. If I can find a local business selling the same stuff as a big box store, I’ll pay a little extra or drive a little farther. But that’s not the case with the Borders and Barnes and Noble’s. If I go into a Borders or BN, and they don’t have the book I want (which happens far too frequently) then I just go order it on Amazon. Why? Because I can get the book in less time, usually for less money, delivered right to my door, and I feel zero connection to a ginormous corporate store that put a lot of little bookstores out of business.
    If the same situation happened with a local bookstore, I’d happily have them special order it.
    I think the age of the giant bookstore is over. I think we should return to small, independent bookstores, maybe some that specialize. I was in one while on vacation in Boulder, CO. It was a fantastic place, smaller than my apartment, but the owner spoke with such passion, and was so into books, that I knew I could trust his recommendations. Sure, he didn’t have the biggest selection, but you could just tell that he read every book he stocked and, in my opinion, that’s the true advantage of a brick and mortar store.

  4. The interesting thing to me in all of this is – Why is Barnes and Noble doing so well financially, while Borders is doing so poorly? That’s not to say things are going great at B&N, they’re projecting 1st quarter losses for 09, and they’ve had pretty serious drops in sales throughout 2008 when compared to 2007. But they have lots of cash on hand, they’re streamlining things from the business side, and they seem prepared to weather the storm of the economic downturn. Borders, by contrast, is dying. Just comparing the current situation, Borders is 42.5 million dollars in debt, whereas B&N has 150 million dollars cash on hand as of the final quarter of 2008.
    What are they doing differently? Outwardly, the stores seem the same – big corporate chains with large book selections and integral cafes. When I was living in California, I almost always went to Borders because they tended to have a better selection of books, and because their location was convenient. Now that I’ve moved to North Carolina, it’s the opposite. B&N seems to have a better selection, and it has far more modern storefronts in better areas. Still, is that enough to make up for the difference? Anybody else have any thoughts?

    • While it is undoubtedly true that Borders is suffering from the same economic conditions that everyone feels, the fact remains that they became out of step with the market they serve. In some cases that seems odd, given that they tend to stock most of the same books BarneyNoble carries. New releases are new releases for both of them, and the same goes for CD’s, DVD’s, and the other materials they carry.
      However, somewhere along the way, they started failing to carry the things people wanted at prices that were competitive. When and how that happened may not be clear.
      It’s just as true in other businesses, and some “previously good” businesses are failing or have failed because they missed the market changes. Some took on debt at inopportune times, while others just decided to sell (or try to sell) items that no one wanted. Some tried to expand, and spent lots of money upfront for new stores that didn’t thrive.
      C

    • One thing to keep in mind is that Borders isn’t just Borders superstores, it also owns Waldenbooks and the Paperchase stationery stores in the UK.

  5. I hope they make it (and good riddance to Paperchase!). At least here in the UK I’ve found Borders to carry a nice variation of genre books, and they’ve always played fair with US exchange rates.

  6. I used to be a frequent Borders customer, but the lack of stock for the last year or so led me to switch to B&N. I read and write a good bit of genre fiction and Borders just doesn’t stock the same way they used to. Bestsellers, sure. New releases? Sure. First books in a series that might lead me to buy the rest of the series later? Not a chance. B&N has a better selection than Borders, but until someone can find a way to compete with Amazon… I can’t see much hope for brick and mortar bookstores in the near future.

    • I absolutely ageed
      I have held book signing events on both B&N and Borders in 23 US cities. It was a nightmare working with Borders stores except its San Francisco stores. B&N has been very supportive and well prepared. However as a reader and author, I got most of benefit from Amazon. I cannot think of any book stores in today’s economy, could possibly compete with Amazon.

  7. Oh no! I hope that’s not the two floor bookstore people have told me about. Guess I’d better run out there and blow – I mean spend – all my money on books.

  8. Borders did not act in its own best interest in a LOT of ways.
    I’m not surprised that they are on full life support right now. Not surprised.

  9. Borders’ woes began long before the economic downturn. I have to disagree with wood artist, though, about the cause. Borders, like B&N, makes 80% of its profit from bestsellers and new releases, and those have never (until lately) been in short supply. Corporate mis-management (as in generally poor business decisions & far too rapid expansion) is the real culprit here.
    Full disclosure: I work at a Borders.

  10. Ous sont les neiges…
    I recently resumed work on a book whose first draft was completed in 1992; this involved (among other activities) reviewing all the various research materials I’d acquired back then, and since. When I opened the first of those old books, out fell a bookmark from a “Borders Book Shop & Espresso Bar” in southern NJ. I remember when I first entered that store (dunno if it’s still there) — thought I’d passed successfully through the Pearly Gates. The only B&Ns I knew were in NYC and, back then anyhow, they struck me pretty much as no more than carpeted warehouses. So by comparison, this Borders thing was very cool (especially since I had only one bookstore in my hometown, and it was a mess).
    It may be that this one-year extension is just delaying the inevitable. An early commenter said that it’s like keeping a 100-year-old comatose patient on life support, and maybe that’s so from one perspective. But for someone who remembers that patient when they were young, healthy, and unlike anyone else in the neighborhood, it’s hard to say flat-out “good riddance to bad rubbish,” y’know?
    All of which silly sentimentalism surely doesn’t bode well for my survival in the hardnose world of business, particularly book business. (But then, I never cared much for business.)

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