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Tick Tock for Borders

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March 31, 2010 – Comments (10) | RELATED TICKERS: BGPIQ , BLOKA

Tomorrow's the deadline for Borders to repay its loan to Pershing Square Capital Management (which, of course, has been extended several times in the past). Meanwhile, there are rumors circulating around that it's securing financing to pay off the loan. What a cliffhanger, though. 

Even if it is able to repay the loan, though, it's not anywhere near out of the woods over the long haul, given its debt situation, the competitive landscape, the digital disruption that's already starting to make a difference... and good grief, it just lost a CEO, too. That's not even easy on far more stable companies.

It really does astound me how long Borders has been able to limp along like this (and some of these situations really do illustrate an interesting investing lesson in how long struggling companies can actually stagger along -- a lot longer than some of us might think, apparently, although again, it really helps to have a super supportive shareholder who arguably doesn't like to admit defeat, doesn't it?). Borders really strikes me as the retailer most likely to fail that I follow (Blockbuster of course fits into the category too, but I don't really follow Blockbuster very closely). Any thoughts? I guess we'll find out what happens tomorrow.  

10 Comments – Post Your Own

#1) On March 31, 2010 at 1:12 PM, TMFBane (36.58) wrote:

Anecdotally, I can say that I go to my local Borders all the time, and yet have only bought one book there over the past six months.

That can't be good.

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#2) On March 31, 2010 at 1:18 PM, TMFLomax (29.19) wrote:

Uh-oh John... nope, I don't think it's good! (I know I have had, again, anecdotal conversations with folks in the past about how often it ends up being a place where people sit in a cushy chair and read a magazine or glance at a book which then ends up back on the rack...!)

Between Amazon Prime and my Kindle... man, I have not set foot in a Borders in ages. There just hasn't been a reason to.

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#3) On March 31, 2010 at 1:37 PM, catoismymotor (38.90) wrote:

I pulled a Alstry and forecast the date of death as 02/28/10. I was wrong. Consequintly I had to surrender my crystal ball and tea cup a few weeks ago.

My wife shops there, loves it. I would rather go to B&N.

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#4) On March 31, 2010 at 2:01 PM, TMFLomax (29.19) wrote:

Oh yeah, cato! I remember the crystal ball prediction! I dunno though, I don't think your prediction was wrong, just early. (And it did report really ugly holiday sales.) 

I know a lot of people really like the experience at Borders better than B&N. But... financially, wow, Borders is just in such worse shape. I know for its fans it's sad, but... the reality is pretty ugly.

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#5) On March 31, 2010 at 6:27 PM, TSIF (99.96) wrote:

I haven't digested it all yet...I'm a bookworm at heart, but Border's financial outlook gives me indigestion, but it appears they are still chugging along on a wing, a prayer, a tax writeoff, cost cutting, and the Christmas season.   They apparently paid off the loan and booked a nice profit for the quarter.  I hesitated in a bet I was having to downthumb Borders here on CAPS since $2 equities have a way of biting due to leverage and an insane, speulative, Mr. Market. I'll probably see if I can catch it near peak tomorrow after the morning spike and after reality sets in and previous bagholders run for cover.

Thanks for the thoughts, I agree that the company is fragile and even with a short term boost, I see no catalyst for a long term happy outcome.

TSIF

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#6) On March 31, 2010 at 6:49 PM, TMFCrocoStimpy (95.48) wrote:

I pulled a Alstry and forecast the date of death as 02/28/10. I was wrong. Consequintly I had to surrender my crystal ball and tea cup a few weeks ago.

Cato, this is definitely NOT pulling an Alstry, otherwise you would have declared that everybody knew that Borders was dead on 2/28/10, and on 3/29/11 everybody would feel that Borders was dead  ;)

-Stimpy

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#7) On April 01, 2010 at 1:46 PM, TMFLomax (29.19) wrote:

TSIF

I just did a real quick glance (I'm off today but I just couldn't resist this cliffhanger).. yeah, look at that... booked a quarterly profit but revenues were down 13% and same-store sales were down 14%. So cost cutting and a tax benefit helped, but... hmm, yeah, I can't be excited about that, personally. I am still bearish, ha. 

This staggering corporate drama continues... ;) "After reality sets in," ha, true enough, whew.

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#8) On April 01, 2010 at 3:03 PM, TSIF (99.96) wrote:

I got my downthumb in at $2.70.  Tried to find the peak, and then the double peak for the day.  The debt refinancing was interesting. Borrowed at about 14% interest to pay off Pershing.  They might have some ups the coming year, but unless there is a White Knight looking for locations then I don't give them much long term hope.  They ramped up inventory before Christmas, sold enough to show a paper profit, and now what?

35% of the float changed hands, (no doubt some more than once), but some new bagholders here.

I wish them the best, but I'm off to Barnes and Noble for some weekend reading. 

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#9) On April 03, 2010 at 9:05 PM, Starfirenv (< 20) wrote:

Great call about their demise- up near 47% in one day. Hope you didn't follow yourself... ouch.

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#10) On April 07, 2010 at 3:19 PM, TMFLomax (29.19) wrote:

Starfirenv

Well, it shows, again, how long a bad situation can drag on, there really isn't any good news other than Borders was able to get that financing to pay off that other debt. Sure, that's better than immediate demise, but it still isn't anywhere near great, the patient is still very sick even if it didn't die.

I red thumbed BGP in CAPS at around $6 quite some time ago. I've been bearish on this one for quite some time, but I guess we'll see what happens from here. I still see no reason for optimism.

 

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