Tags: Borders | Seeks | Financing | Credit | Woes

Borders Seeks Financing to Fight Credit Woes

Friday, 10 Dec 2010 04:10 PM

Bookseller Borders Group is trying to obtain new financing to avoid violating the terms of its credit agreements early next year.

The company, which reported a wider quarterly loss on Thursday, said its borrowing capacity was cut after a third-party review that lowered the estimated value of its inventory if the book store chain had to liquidate it.

It was the latest sign of pressure on bookstores as readers increasingly turn to electronic reading devices and buy their books online.

Borders shares fell 7.3 percent, or 10 cents, to $1.27 in after-hours trading.

"If the steps that we are taking are not successful, we could be in violation of the terms of our credit agreements in the first quarter of calendar 2011, which could result in a liquidity shortfall," the company said of its efforts to find new financing.

Disappointing sales also led to the company's borrowing capacity being cut, said Borders, whose debt, net of cash at the end of the quarter was $331.1 million.

Despite the potential liquidity woes, the company's vendors are still being supportive and shipping inventory, Borders executives said on a conference call with investors.

The news came days after activist investor William Ackman offered to help Borders buy larger rival Barnes & Noble for $963.7 million.

On the call, Borders Chief Executive Mike Edwards said the company "welcomes his (Ackman's) participation" in funding a bid for Barnes & Noble, but did not comment further.

Both chains face cutthroat competition from online retailer Amazon.com Inc, home of the popular Kindle electronic reading device, and other prominent players in the electronic book arena like Apple Inc. and Google Inc.

Borders launched its own e-bookstore in July. Thursday's results marked the first full quarter to incorporate the company's e-bookstore sales.

Sales fell 17.6 percent to $470.9 million in the third quarter ended Oct. 30. Sales at its stores open at least a year, or same-store sales, fell 12.6 percent.

Standard & Poor's Equity Research analyst Michael Souers was looking for a 9 percent decline in same-store sales.

"It seems like they have been losing market share. There is still a lot of pressure being put on from some of the other e-book retailers that really have an edge on Borders at this point," Souers said.

Borders, which sees its physical stores as critical to winning over buyers of e-books, has been redeploying some of its floor space to display more non-book items and toys and games for children. On Thursday, the company said it is negotiating vigorously with landlords for lower rents.

Borders' loss from continuing operations widened to $74.4 million, or $1.03 a share, from $37.7 million, or 63 cents a share, a year earlier.

Last month, Barnes & Noble reported a larger-than-expected quarterly loss and gave a holiday forecast that missed Wall Street expectations.

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Bookseller Borders Group is trying to obtain new financing to avoid violating the terms of its credit agreements early next year. The company, which reported a wider quarterly loss on Thursday, said its borrowing capacity was cut after a third-party review that lowered the...
Borders,Seeks,Financing,Credit,Woes
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2010-10-10
Friday, 10 Dec 2010 04:10 PM
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