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Borders: another business destroyed by private equity?
Posted 24/11/09
I see it’s been reported that Borders the book sellers has stopped taking orders for new books on its website while the retailer “is in discussion with potential buyers” with some publishers also reported to have severed links with the retailer.
Apparently Borders doesn’t have enough cash to last until Christmas and could go into administration if no buyer is found.
The group may have suffered from increased competition from online retailers but no doubt the heavy debt load imposed by private equity owners surely hasn’t helped its cause.
The Borders chain was sold in June 2007 to Risk Capital Partners who in turn sold it on to the private equity firm Valco earlier this year.
The mind boggles how the large institutions and lending banks have lapped up the highly leveraged offers served up by Private Equity. When management sells shares the market questions if everything is alright, yet when Private Equity offloads a material stake the institutions lap it up!
Some argue that Private Equity imposes better financial discipline, and there are examples of Private Equity Owners doing a great job, however, in tougher times high levels of debt leave little room for manoeuvre. Moreover, as banking covenants are breached it simply offers lending banks an opportunity to revise terms and impose yet higher fees.
Time to get really tough on the Private Equity boys!
This entry was posted 2 years, 2 months ago.
