Saturday, January 23, 2010


Run for the Exits

Also not getting much press yet: Financial Times reported on Wednesday that small vendors are retaining counsel to make sure they get paid by Borders.

Four years ago in the Village Voice -- pause for irony -- I noted that musclebound chains could be in deep trouble if they didn't get on board with electronic and on-demand technologies that would slowly render their credit-on-return Xanadus into a massive liability.

Guess what?:
The average time it took for Borders to pay back suppliers spiked over 40% to 97.9 days in the year ended 31 October, from 69.4 days in the prior year period... As of 31 October, the company had USD 215m available under its USD 1.125bn revolver, based on inventory and credit card receivables. According to the credit agreement backing the Bank of America-led loan due 2011, a 1.1x fixed charge ratio kicks in if the retailer’s borrowings exceed 90% of the maximum amount permitted. Borders would not currently be in compliance with the fixed charge ratio if it were tested, SEC filings show...

Battle of the e-readers aside, Border’s faces an even greater threat from loss of in-store shoppers to internet retailers, particularly Amazon, and was forced to shut its 200-store Waldenbooks chain last year. For 3Q09 ended 31 October, Border’s revenues were USD 602.5m versus USD 693m in the comparable period.
Bear in mind, by the way, that the comparable period in '08 was when the economy was already in an absolute pants-wetting freefall.

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