The financial markets are putting a major strain on companies that have to borrow money and Borders, the nation's second-largest bookstore chain and a major venue for manga sales, is the latest company to feel the pressure. Shares of the Borders Group fell 29% as the book retailer suspended its dividend and announced that it was investigating a wide range of alternatives including the "sale of the company." Borders CEO George Jones noted that the company has been searching for financial options but "the current credit environment has made many of these alternatives prohibitively expensive or entirely unavailable."
Borders has lined up some $42.5 million in financing, but the source of the money is the aggressive hedge fund, the Pershing Square Capital Management, and the funds come at very high price. The Pershing Square loan, which is due next January 15th, carries a hefty 12.5% interest rate and as part of the agreement Pershing Square will receive 14.7 million warrants that, if exercised, would give the hedge fund an additional 20% of Borders (it already owns 18%). According to analysts the onerous conditions of the
Borders will have two weeks to find a better source of funding, but in today's financial market that is a tall order indeed.
