Borders Gets $550 Million Loan Commitment from GE Capital, With Strings

Read the fine print. Borders is still on the ropes. NYTimes:

... the struggling bookseller, said on Thursday that it had received a commitment from GE Capital for $550 million in refinancing — so long as the company meets several requirements, including signing up agreements with publishers to convert delayed payments into loans. ...

But Borders is exploring other alternatives, including an “in-court restructuring” — referring to a potential bankruptcy filing — its president, Mike Edwards, said in a statement.

“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,” Mr. Edwards said. “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.”

To secure the GE Capital senior secured financing, Borders must take several steps to improve its finances. Crucial among these is lining up $125 million in junior debt financing, either by converting vendor payables or from other sources. In a series of meetings, Borders has sought to persuade publishers to accept what amounts to a loan for delayed payments.

The goal has been for publishers to take up one-quarter to one-third of Borders’ reorganized debt, but the exact percentage has not yet been determined, people briefed on the matter previously said. These people spoke on condition of anonymity because they were not authorized to speak publicly on the matter.

But publishers said this week that they remained hesitant to accept Borders’ preliminary offer. Several publishers that have negotiated with Borders as a group said that the bookseller had still not presented a viable plan to move the company forward. ... "