Borders Receives Refinancing Commitment from GE Capital

Borders Group has received a commitment from GE Capital, Restructuring Finance to provide a US$550m senior secured credit facility that, upon completion, including the obtaining of US$125m of additional junior debt financing via the conversion of vendor payables and/or external sources, will provide Borders with the financial flexibility and an appropriate level of liquidity to move forward with its strategy to reposition its business model and the Borders brand. GE Capital provided its financing commitment following a comprehensive review of the company’s strategic plan to restructure its business model by focussing on core business areas in order to improve profitability and cash flow.

The new US$550m 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 US$175m of the senior credit facility with other lenders, which GE Capital and Borders are both working to secure.
• US$125m 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’ finalisation of a store closure programme 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.

Borders Group president, Mike Edwards, said: “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. 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 capitalise 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, that support the company’s business plan. The company believes that this commitment from GE Capital positions Borders well to move the business forward, and expects to demonstrate to its vendors how their support for Borders will be to the benefit of the company, the vendors and their shared consumers.

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