logo
Plus   Neg
Share
Email

Borders Group Plunges 8% As Two Top Executives Resign Amid Liquidity Crisis

Borders-Group-01042011-1.jpg

Bookstore chain Borders Group, Inc. (BGP) announced the resignation of two senior executives in a regulatory filing on Monday. Executive Vice President, General Counsel and Secretary Thomas Carney resigned on Sunday, while Senior Vice President and Chief Information Officer Scott Laverty resigned earlier in the day. Following the announcement, the company's stock dropped more than 8% in after-hours trading.

Carney has served as general counsel and secretary of the company since joining it in December 2004. Meanwhile, he has been an executive vice president of the company since April 2008, senior vice president from April 2004 to April 2008, and vice president from December 2004 to April 2004.

Prior to joining Borders, Carney was a partner at the law firm of Dickinson, Wright, Moon, Van Dusen & Freeman in Detroit for five years.

Meanwhile, Laverty has served as senior vice president, chief information officer of Borders since May 2009. Prior to joining Borders, he was a partner with IBM for two years. From 2001 through 2006, he was a senior manager with Deloitte Consulting, where he was the North American Oracle Retail practice leader.

Laverty has also served as a principal consultant at PricewaterhouseCoopers from 1997 through 2001. Earlier in his career, he worked in the retail industry, including positions with Payless Shoesource and Michaels Arts and Crafts.

Ann Arbor, Michigan-based Borders has recently been facing a financial crisis and has been striving to refinance its debt. Reports last week indicated that it will delay payments to some publishers as it seeks to conserve cash and refinance debt.

The company is said to have notified the publishers with which it seeks to restructure payments, and revealed that it could violate its existing credit agreements in the first quarter of 2011 as well as experience a liquid shortfall without the refinancing.

The book retailing business has been struggling in recent times hurt by the poor economy, growing online shopping trend and customer shift towards digital technology. Publishers have long been concerned about Borders' financial health, but have continued to ship new inventory to it. Last week, Nashville-based Ingram Content Group said it would continue supplying books to the book retailer.

In mid-December, Borders said it was trying to obtain new financing in order to avoid violating its credit agreements and a liquidity crisis that could impact its daily operations. The company said its borrowing capacity had been cut after a third-party review that lowered the estimated liquidation value of its inventory.

In early December, Borders reported a net loss for the third quarter that widened to $74.4 million or $1.03 a share from $37.7 million or $0.63 per share in the year-ago period. Revenue for the quarter declined 18% to $475.6 million from $577.8 million in the year-ago period. Same-store sales for the period fell 13%.

BGP closed Monday's regular trading session at $0.96, up $0.06 or 6.64% on a volume of 3.49 million shares, higher than the three-month average volume of 1.46 million shares. However, the stock lost $0.08 or 8.33% in after-hours trading. In the past 52-week period, the stock has been trading in a range broad of $0.85 to $3.29.

For comments and feedback contact: editorial@rttnews.com

Follow RTT