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March 21, 2008

 

Borders on the Rocks

After spending a lot of time over the last week discussing Borders' new strategy to display more books face out (and thereby reduce the number of books a typical store carries), it turns out that the whole discussion may have been moot. The struggling chain had a need for more money to "remodel stores and pay for new technology," but, thanks to the rocky climate on Wall Street, Borders was initially unable to find a willing lender. Translation: without an infusion of cash, Borders was going to run out of money.

This left CEO George Jones with few options. Pershing Square, a hedge fund with investments in many large retailers and Border's largest shareholder, has agreed to "lend $42.5 million and to make an offer for some of [Borders'] international chains," according to Bloomberg. The loan comes with a huge interest rate and comes with various provisions that give the fund ever larger control over the book chain's fate. Borders has also said that it is now seeking a buyer and the company has suspended its dividend. This deal is something of a last resort for Borders, and the stock plunged nearly 30% on Friday, the biggest drop in the company's history.

So what does this mean to Borders customers and employees? It's still too early to know. the deal with Pershing staves off the possibility of Borders running out of money in the near future, and offers a life raft for the chain to get through the challenges brought on by the slowing economy. The path forward is tenuous at best; expect more developments in the coming months.

- C. Max Magee @ 10:25 AM ~ comments: 2 ~ Links to this post

Comments:

and, what does this situation mean for amazon's book business? what happens if border's goes under? b&n takes over online and retail big-bookseller business? ah wall st. and it's schemes...
# posted by Blogger Emre Peker @ March 21, 2008 11:15 AM
 
is it possible that indies can step in and take advantage of borders' downfall, at least in terms of brick & mortar stores? Let's hope. Borders runs crap stores on the whole anyway. Their categories are not thought through.
- booksurvival.blogspot.com
# posted by Blogger Reader @ March 21, 2008 1:58 PM
 

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