ANN ARBOR ? Borders Group will survive to fight another day. The company announced Thursday night that it has received a commitment from GE Capital for $675 million that will provide Borders with the financial flexibility and liquidity to reposition its business model and the Borders brand.
“We are pleased that, after a thorough review of our business strategy and related long-term potential by GE Capital and outside experts, GE Capital is committing to put in place a new senior financing facility for the company,? said Borders Group President Mike Edwards.
?This is an important step for Borders toward implementation of its comprehensive plan to reposition itself as a vibrant national retailer of books and other related products to the consumer. We strongly believe that, based on our business strategy, Borders will be able to transform its business to capitalize on the evolving reading marketplace and perform as a best-in-class destination and shopping experience for consumers.”
Borders previously reported that, as part of its refinancing efforts, it had delayed payments to its vendors. Subsequently, the company has been in discussions with certain of those vendors on restructuring its financing arrangements. The company has also been in discussions with certain landlords and other parties with respect to arrangements, including financing arrangements, which support the company’s business plan.
“Borders is doing everything possible to maintain its long-term and valued relationships with our vendors and publishers, which are in the best interests of serving our combined customers,? Edwards said. ?We view the refinancing route as the most practical, efficient and beneficial to all parties, and we are working with our vendors in this regard. At the same time, given the current environment surrounding Borders, and in order to assure that the company can pursue its efforts to position itself to properly implement its business plan, it is prudent as well for Borders to explore alternative avenues, including the possibility of an in-court restructuring. We are confident that whatever path Borders pursues to implement its strategy, we will be able to count upon the support of our vendors, who understand the critical role a strong Borders provides to the reading public.?
The new $550 million senior secured credit facility, once funded, will mature in 2014, and will replace the company’s existing revolving senior credit and term loan facilities.
The commitment provided by GE Capital is subject to certain conditions, including:
? The successful syndication of $175 million of the senior credit facility with other lenders, which GE Capital and the company are both working to secure;
? $125 million of junior debt financing provided by certain vendors and other lenders;
? The completion of supporting financing arrangements with the company’s vendors, landlords and other financing parties on terms satisfactory to GE Capital;
? Borders’ finalization of a store closure program comprising the identification of underperforming stores that will be closed as soon as practicable;
? GE’s completion of its business, financial and legal due diligence; the negotiation and execution of definitive financing documents; the absence of any material adverse change in the company’s business or financial condition; and other customary conditions.
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