December 31, 2010 7:34 pm

Borders shares tumble on payment delays

Borders, the second largest US bookstore chain, saw its shares fall more than 20 per cent on Friday after it confirmed it had delayed payments to some publishers amid liquidity concerns.

The company said earlier in December that it was in talks to refinance its business, as it continues to record losses, and warned that it might violate credit agreements in its first quarter if those talks fail.

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Its shares fell 25 cents, or 22 percent, to $0.90 at lunchtime in New York Stock Exchange composite trading.

Borders’ largest shareholder is Bill Ackman’s Pershing Square fund, which owns about 37 per cent of Borders stock. Bennett LeBow, a tobacco billionaire who invested in Borders in May, holds a similar-sized stake, and serves as non-executive chairman.

Both Borders and its rival Barnes & Noble have been losing business to Amazon, the online retailer, and to discounters including Walmart, Costco and Target.

At the same time, both are seeking to bolster their digital and e-commerce business, with Barnes & Noble promoting its new Nook e-reader.

Borders said in December that its quarterly losses almost doubled to $74.4m from the same period last year, while total sales fell 17.6 per cent to $470.9m. Comparable sales at its stores declined by 12.6 per cent, while e-commerce sales fell 8.6 per cent as it overhauled its website.

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