Borders and Pershing Amend Financing Agreement

• Posted by ToddSullivan
• on March 31st, 2009

This eliminated any liquidity concerns for at least the next year.

From Borders

NN ARBOR, Mich., March 30 /PRNewswire-FirstCall/ — Borders Group, Inc. (NYSE: BGP) 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.

“We are pleased to have the continued support of our largest shareholder as we focus on getting our company’s financial house in order,” said Borders Group Chief Executive Officer Ron Marshall. “The extension of the loan gives us some necessary breathing room, which is important in the current economic environment. 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.”

Pershing Square currently owns 10.6 million shares of Borders common stock, or 18% of the shares outstanding. If Pershing executes its 14.7 million warrants, it would own 25.3 million shares, or 33.6% of the total.

Borders (BGP) is scheduled to release result today at 4pm (Central time?). Do not expect aq miracle. What you want to see is expenses falling, debt falling and sales at least stabilized. after what has happened the last 6 months, accomplishing that would be a huge boost.

Disclosure (“none” means no position): Long BGP

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