Borders quiet on Pershing talks; shares fall

CHICAGO (Reuters) - Borders Group BGP.N declined to discuss the alternative financing discussions it is having with Pershing Square Capital Management during a conference call on Wednesday, and its shares plunged nearly 48 percent.

Late on Tuesday the No. 2 U.S. bookseller behind Barnes & Noble Inc (BKS.N) posted a worse-than-expected quarterly operating loss and said it would no longer try to sell itself.

The company also said on Tuesday that it was in talks with shareholder Pershing Square on an alternative financing transaction. Pershing Square negotiated a $42.5 million financing deal with Borders earlier this year. Borders still has the right to exercise its option to sell its Paperchase stationery unit to Pershing for $65 million.

Shares of Borders fell to 88 cents in morning trading after closing at $1.68 on Tuesday before the company issued its fiscal third-quarter results. While the drop was dramatic, the shares were still above the low of 72 cents they hit on Friday.

Borders is cutting back on spending as it works on improving operations and strengthening its balance sheet. It now expects capital expenditures to total about $80 million this fiscal year, down from $143 million in the previous year, Chief Financial Officer Edward Wilhelm said during the call.

The retailer also plans deeper cuts in operating expenses than it previously anticipated. It now expects to cut about $70 million in costs this year, up from a prior target of $60 million. For next year, it expects to trim operating expenses by $140 million, up from a target of $120 million.

As part of its effort to cut expenses, Borders said it had tried with some success to renegotiate for better terms on store leases.

(Reporting by Jessica Wohl; Editing by Lisa Von Ahn)