Monkey Wards All Over

Facing Cash Crunch, Borders Mulls Sale
By DAVID RUNK,
AP
Posted: 2008-03-20 11:47:21
DETROIT (March 20) - Borders, the nation's second-largest bookseller, said Thursday it may put itself up for sale and has lined up $42.5 million in financing to help continue operating. Borders Group Inc. said the financing commitment comes from investment funds affiliated with Pershing Square Capital Management LP and includes an offer to buy Borders' international businesses.

"We believe that consummation of the transactions under the commitment will make us fully funded for 2008, where absent these measures, liquidity issues may otherwise have arisen in the next few months," Borders CEO George Jones said in a statement.

After postponing its scheduled fourth-quarter earnings results Wednesday, the company reported net income of $64.7 million, or $1.10 a share, compared with a loss of $73.6 million, or $1.22, during the same period last year.

Revenue fell 2 percent to $1.35 billion, from $1.37 billion.

Analysts polled by Thomson Financial expected profits of $1.42 per share on sales of $1.37 billion.

Quarterly results included a $7 million loss from the sale of Irish and British businesses for $13 million.

The sales agreement for international businesses announced Thursday gives Borders the option until Jan. 15 to require Pershing Square to pay $125 million for the international business, which includes Borders' Paperchase, Australia, New Zealand and Singapore subsidiaries. But Borders said it must pursue the sale of those operations first before any deal with Pershing.

"This will be a challenging year for retailers due to continued uncertainty in the economic environment," Jones said. "Looking forward to 2008 and beyond, the company determined that additional capital was required to execute our operating plan, and as a result we began to explore various financing options.

"The current credit environment has made many of these alternatives prohibitively expensive or entirely unavailable."

Borders group a year ago announced a restructuring that included a fresh face for its U.S. superstores and a jump back into online bookselling. Borders opened the first of its new concept stores last month near its headquarters, and has said its new Borders.com Web site was to make its debut shortly.

Ann Arbor-based Borders said J.P. Morgan Securities Inc. and Merrill Lynch & Co. have been retained as the company's financial advisers to assist the company as it explores strategic alternatives.

The company said it can give no assurances that a transaction of any kind will occur.

Or this happy article

Borders Explains Financing Moves
by Jim Milliot -- Publishers Weekly, 3/20/2008 9:38:00 AM

Slowing sales late in the fourth quarter, the collapse of talks to sell its Australian/New Zealand operation and the disarray in the capital markets were the main factors prompting Borders to seek a quick infusion of capital from Pershing Square, executives told analysts in this morning’s conference call. The refinancing appeared to catch many analysts by surprise and some expressed concern about the cost of the deal with Pershing which carries a 12.5% interest rate.|

CEO George Jones, who noted the company has carried a high debt level for some time, said Borders felt it needed financial stability in the current year, both to move ahead with its strategic plan as well as to ease any concerns vendors may have about Borders’s financial health, although he added that Borders is not aware of any vendors who are planning to stop shipping books.

Jones said the “top priority” for the company in 2008 is to improve the company’s bottomline and its ability to generate cash. The company will reduce costs has much as possible in in headquarters, stores and supply chain, said CFO Ed Wilhelm. The company will also work to cut inventory while improving inventory turns.

In the past year, Borders had a net loss of $157.5 million compared to a loss of $151.3 million in 2006. The loss included a $125.7 after tax loss related to the sale of its U.K. and Irish stores plus $27.7 million of after-tax non-operating charges. Total sales rose 2.6%, to $3.82 billion, over 2006, which had an extra week.

Asked why Borders decided to look for strategic options after it received the funding from Pershing, Wilhelm said the company is looking to maximize shareholder value. He said Borders believes the strategic plan it is working on is the right one, but that it could be more beneficial to stockholders to sell the company. The new funding gives Borders time to conduct a full review of its options, Jones noted.