NEW YORK (
confirmed late Thursday it's taken the step of delaying payments to some of its vendors while it works to refinance its debt.
The Ann Arbor, Mich.-based bookseller, whose debt net of cash stood at $331.1 million as of Sept. 30, disclosed it was in "detailed discussions with potential lenders for replacement financing" on Dec. 9 when it posted a loss of widening loss from continuing operations of $74.7 million for its fiscal third quarter amid a sharp 17.6% year-over-year decline in sales to $470.9 million. At that time, it reported trade accounts payable of $444.9 million.
"As part of this potential refinancing, Borders has determined that it is necessary to restructure its vendor financing arrangements and is delaying payments to certain of its vendors," said company spokesperson Mary Davis in a telephone statement to
The stock tumbled in extended trading following the news. The shares were last quoted at 99 cents, down 14.7%, on volume of nearly 120,000, according to
The company has notified the specific vendors of the delay decision and it plans to work with them to restructure their arrangements, according to the statement from Davis, who declined to provide further comment on the situation. But Borders also made clear there were no guarantees that it would be able to complete its refinancing plans.
"Borders stated that there can be no assurance that it will be successful in refinancing its senior credit facilities or restructuring its vendor financing arrangements," the company's statement continues. "As the company previously reported, the absence of refinancing could cause the company to violate the terms of its existing credit agreements in the first calendar quarter of 2011 and the company could experience a liquidity shortfall."
Borders had mentioned the possibility of a liquidity shortfall in the first calendar quarter of 2011 in its Dec. 9 press release disclosing its third-quarter results.
Earlier this month, hedge fund manager
, whose Pershing Square Capital Management owns securities representing a 41.8% stake in Borders, offered to finance an acquisition by the company of rival
Barnes & Noble
in a cash-and-stock deal valuing Barnes & Noble common shares at $16 each.
Written by Michael Baron in New York.
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