Borders Gets Another Year

In the floundering economy, major book retailing companies, such as Borders, have been finding it hard to increase revenue, pay off loans, and still focus on growing as a company.  Book sales are down and product costs are up.  Thanks to negotiations with Pershing Square, however, Borders will be allowed a lengthy 12-month respite in regard to their finances.

Pershing, the largest shareholder of Border’s stocks, has extended the repayment of their $42.5 million loan to Borders, in exchange for some big benefits:  The “put” option to buy the Paperchase chain will expire, and the big grants of 14.7 million warrants will be reset from the previous price of $7 a share to the current stock price.  This loan has been renegotiated twice now.

All parties are happy with the arrangements: Borders can continue to use money to boost sales and cut cost without having to worry about the once-quickly approaching payment date, and Pershing receives some much-needed space.  Their CEO, Ron Marshall, says, “The extension of the loan gives us some necessary breathing room, which is important in the current economic environment.”