Beleaguered book retailer Borders (BGP) needs every drop of capital it can get in order to stay competitive with the likes of Barnes & Noble (BKS) and Amazon (AMZN). One way it's doing so is through a startling, but not surprising development: selling its London-based Paperchase stationery, cards and gift unit for $31 million to Primary Capital, a UK-based private equity firm, in a bid to reduce its debt.
Under the agreement which is set to close next week, Borders will continue to purchase and sell Paperchase products in its 337 stores and use $25 million of the proceeds to help pay down the $90 million term loan credit facility the company agreed to in April in order to keep itself afloat.
"The sale of our Paperchase business is another major step in strengthening our balance sheet - and enables us to place an even greater focus on our financial and strategic initiatives, which are vital to a Borders turnaround and revitalization of the brand," said Borders CEO Mike Edwards in a statement. "We look forward to continuing our strong relationship with the Paperchase team to provide our customers with the wide array of fashionable gift and stationery products they've come to expect from Borders."
The deal comes just a month after Borders laid off an unspecified number of Paperchase staff, its third round of job cuts in 2010, six years after the company originally bought a majority interest in Paperchase for $24.1 million and one week after launching an e-bookstore.
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