Borders filed details on their new credit agreements with the SEC along with filing their formal quarterly report. They disclose that the new $90 million term loan carries a minimum interest rate of 14.75 percent. Additionally, Borders needs to raise at least $25 million from the sale of new stock shares by May 15, or else there will be a $10 million reserve against the borrowing base of that term loan. (Even with yesterday’s sharp rise in the stock, Borders still has a current total market cap of about $150 million.)
Good old Pershing Square is protected in the case of a new share offering, though; they would get additional warrants at 65 cents a share to make sure that they are not diluted in such an event. Which means that all other shareholders–including those folks that bought in yesterday–would get diluted even further.
The term loan issuers also get first crack at the first $25 million of proceeds from any sale of the Paperchase subsidiary, implying that Borders is still considering spinning off the unit as its most liquid asset. That loan also has “a first priority security interest in 65% of the voting stock of Paperchase, intellectual property of the Company and its subsidiaries and the fixed assets of the borrowers and guarantors under the term loan facility.”
In the quarterly report, the bookseller indicates that 25 Borders leases and another 102 Walden leases are up for renewal this year. They note “we continue to evaluate the performance of existing stores, and additional store closures could occur in cases where our store profitability goals are not met.” Additionally, they “believe that the company has the potential to operate mall-based stores profitably, and to that end have signed short-term lease agreements for desirable locations, which enables us to negotiate rents that are responsive to the then-current sales environment. We will, however, continue to close stores that do not meet our profitability goals, a process which could result in additional future asset impairments and store closure costs.”
Following reports of layoffs among full-time staff and a shift to more part-time personnel, Borders states that as of January 30 (prior to the most recently reported layoffs) they have approximately 8,500 full-timers, versus over 12,000 part-time employees.
10-K
Term loan documents