Another month to wait…..
Borders Group, Inc. (NYSE: BGP) today announced an agreement with Pershing Square Capital Management, L.P. on behalf of its affiliates, to extend the expiration date of the previously announced Borders option to “put” its U.K.-based Paperchase gifts and stationery business to Pershing Square for $65 million, subject to certain conditions. The “put” was due to expire Jan. 15, 2009, but has now been extended until Feb. 16, 2009. At the same time, the deadline for repayment of the $42.5 million senior secured term loan, which was originally payable to Pershing Square by Borders on Jan. 15, 2009, has also been extended to Feb. 16, 2009. Other terms of the “put” option and the term loan remain unchanged except that the approximately $1 million loan repayment premium that Borders is required to pay Pershing upon repayment of the $42.5 million loan remains due no later than Jan. 15, 2009.
What to think? I do not see it as bad news. Perhaps Borders has a potential buyer for Paperchase? The net of the deal is $22 million to Borders so this isn’t a delay because they can’t pay type of thing. One has to assume the delay is because something better may be on the table….
Disclosure (“none” means no position):Long BGP
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One reply on “Borders Extends Deadline for Pershing Deals $$”
I believe the translation is “buyout pending”. The stock isn’t priced the way it is because bankruptcy isn’t a high probability. But there is very significant value left in the business; they just can’t support their debt levels in the current economy. The company has been nothing but a black eye and, in hindsight, outright mistake for Bill Ackman, and Borders probably found a buyer, at what might be a fire-sale price (but a huge multiple from the market price).