Borders to sell Paperchase unit to pay down debt

Ann Arbor, Mich. Borders Group Inc. said Tuesday it will sell its Paperchase Products Ltd. stationery subsidiary to British private equity firm Primary Capital Ltd. for $31 million in order to reduce the retailer’s debt load.

The move is Borders latest salvo in its ongoing effort to cut costs and improve profitability since financier Bennett LeBow invested $25 million in the struggling chain in May, becoming the company's largest shareholder, chairman and CEO.

Borders said it will continue to buy and carry Paperchase products in its U.S. stores. The book retailer bought a majority interest in U.K.-based Paperchase in 2004 for $24.1 million.

It will use $25 million of the proceeds to reduce the amount outstanding under its $90 million term loan credit facility.

The deal is expected to close within the next week.

"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 president Mike Edwards.

Borders has been struggling for several years as it faced falling demand and increasing competition from discounters and online book sellers.