Borders Group Inc., the second-largest U.S. bookstore chain, dropped the most in almost 20 months after saying it delayed payments to some publishers while trying to avert a liquidity crisis.

Borders sank 25 cents, or 22 percent, to 90 cents at 12:33 p.m. in New York Stock Exchange composite trading, the biggest intraday drop since May 7, 2009. The shares had retreated 1.7 percent this year before today.

The company said earlier this month it was in talks to refinance and may violate its credit agreements in the first quarter if negotiations fail. Borders reiterated today that there can be no guarantee its initiatives will be successful. If the refinancing fails, the chain may face a “liquidity shortfall” in the next quarter, Mary Davis, a Borders spokeswoman, said today by telephone.

“The timing certainly raises eyebrows,” Peter Wahlstrom, an analyst with Morningstar Investment Services, said in a telephone interview. Bookstores are typically most flush with cash at the end of the holiday shopping season, when they can stock lower inventories for the slow winter months, he said.

“If they are doing this at the end of December, it’s more concerning,” said Wahlstrom, who is based in Chicago.

The Ann Arbor, Michigan-based chain is in discussions with potential lenders that would provide funds through the start of 2012, the company said Dec. 9. Borders also said at the time it was looking to raise money through asset sales and cost reductions.

Additional Lenders

If Borders doesn’t find additional lenders, the company may have to accelerate store closures, Wahlstrom said.

The Wall Street Journal yesterday reported the payment delays.

Borders and larger rival Barnes & Noble Inc. face growing competition as consumers download more digital books on electronic devices such as Amazon.com Inc.’s Kindle. Borders has reported three quarterly losses in a row as sales and its store count shrank.

Borders had $23.1 million of cash on hand at the end of October, compared with $298.4 million of short-term debt and $55.8 million of long-term debt, the company said in its third- quarter earnings report released Dec. 9. Working capital, the amount a company has to maintain operations, was a negative $15.3 million, according to Bloomberg calculations. Negative working capital indicates a company may be unable to meet short- term obligations through current assets of cash, accounts receivable and inventory.

On Dec. 6, the chain’s largest investor, William Ackman’s Pershing Square Capital Management LP, disclosed that it would help Borders fund a bid for Barnes & Noble.