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Borders’ Annual Sales Flat; Pershing Lends $42.5 Million

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April 17 – April 24, 2008 Edition

Borders’ Annual

Sales Flat; Pershing

Lends $42.5 Million

WASHINGTON, DC/4/14/07–Borders Group, Inc. filed its 10-K annual report with the SEC April 14, reflecting activity for the fiscal year ended February 2, 2008. Consolidated sales for the fiscal year ending February 2, 2008 totaled $3,774.8 million, relatively flat compared to the $3,683 million in sales in fiscal 2007. The company attributed stale performance to the opening of new superstores, partly offset by negative comparable store sales.

The international segment, however, helped bolster sales due to newly-opened superstores, favorable foreign currency exchange rates and positive comparable store sales. A decrease in sales of the Waldenbooks Specialty Retail segment partially offset the increase in consolidated sales, due primarily to store closures and negative comparable store sales. Net income losses widened to $157.4 million in 2008 from $151.3 million in 2007. Earnings per common share of stock (diluted) also declined from $61.9 in 2007 to $58.7 in 2008.

On April 9, 2008, Borders completed a financing agreement with Pershing Square Capital Management, L.P. (“Pershing Square”) on behalf of certain affiliated investment funds. Under the agreement, Pershing Square has loaned $42.5 million to the Company and will purchase, at the Company’s discretion, some of the Borders’ international businesses under a $135.0 million backstop purchase commitment. The terms of the Pershing Square financing agreement have been approved by the lenders under the Company’s current revolving credit facility.

"Based on current internal projections, the Company believes that the financing agreement with Pershing Square will allow the Company to be fully funded during fiscal 2008, where absent these measures, liquidity issues may otherwise have arisen during the year. However, there can be no assurance that the financing agreement with Pershing Square will be sufficient to sustain the Company’s liquidity needs during fiscal 2008," the report said.

Throughout fiscal 2007, the Company continued to implement its strategic plan, to grow comparable store sales and profitability in the domestic Borders superstores, right-size the Waldenbooks Specialty Retail business, explore strategic alternatives in the International segment, and leverage innovation, technology and strategic alliances to differentiate the Company’s business, primarily through its Borders Rewards loyalty program and through the planned launch of a proprietary e-commerce Web site during the spring of fiscal 2008

In the SEC report, the company said its success "is dependent on the availability of adequate capital to fund the Company’s operations and to carry out its strategic plans. Key drivers of the Company’s cash flows are sales, expense management, capital spending and the Company’s inventory turn improvement initiative. There can be no assurance that the Company will have adequate access to capital markets, which could have a material adverse effect on the Company’s ability to implement its business strategy and on its financial condition and results of operations."

On March 20, 2008, Borders announced that it would undergo a strategic alternative review process. J.P. Morgan Securities Inc. and Merrill Lynch & Co. have been retained as the Company’s financial advisors to assist in this process. The review will include the investigation of a wide range of alternatives including the sale of the Company and/or certain divisions for the purpose of maximizing shareholder value. Barnes & Noble has been mentioned in the media as a potential buyer.

Borders is currently exploring changes to its superstore format, and has developed a concept store that incorporates these changes. The first of these new concept stores opened during the first quarter of 2008. The concept store incorporates many new components, including enhancement to certain categories within the store, as well as certain technology enhancements. These technology enhancements are principally tied to the Company’s efforts to launch its own e-commerce business. The Company also plans to leverage its recently launched Borders Rewards loyalty program to drive sales.

Borders’ principal capital requirements are to fund investment in its strategic plan, including the refurbishment of existing stores, continued investment in new corporate information technology systems such as its e-commerce Web site, and maintenance spending on stores, distribution centers and corporate information technology. The Company will also require funds to open its 15 new concept stores during 2008, the first of which opened in the first quarter.

Borders Group, Inc., through its subsidiaries, Borders, Inc. (“Borders”), Walden Book Company, Inc. (“Waldenbooks”), Borders Australia Pty Limited and others (individually and collectively, the “Company”), is the second largest operator of book, music and movie superstores and the largest operator of mall-based bookstores in the world based upon both sales and number of stores. At February 2, 2008, the Company operated 541 superstores under the Borders name, including 509 in the United States, 22 in Australia, five in New Zealand, three in Puerto Rico, and two in Singapore. The Company also operated 490 mall-based and other bookstores, including stores operated under the Waldenbooks, Borders Express and Borders Outlet names, as well as Borders-branded airport stores. In addition, the Company owned and operated United Kingdom-based Paperchase Products Limited (“Paperchase”), a designer and retailer of stationery, cards and gifts. As of February 2, 2008, Paperchase operated 112 stores, primarily in the United Kingdom, and Paperchase shops have been added to 319 domestic Borders superstores.

As of February 2, 2008, Borders had a total of approximately 14,100 full-time employees and approximately 15,400 part-time employees worldwide. George L. Jones was appointed President, Chief Executive Officer and a Director for the Company effective July 17, 2006.