UPDATE 1-Borders repays loans, gets more credit

* Borders repays loan to hedge fund

* Secures access to more credit

BOSTON, March 31 (Reuters) - Borders Group Inc BGP.N , the ailing U.S. bookseller, on Wednesday repaid a loan to its largest investor and secured access to more credit to meet its future borrowing needs, a person familiar with the matter said.

The Ann Arbor, Michigan-based company returned $42.5 million to New York-based hedge fund Pershing Square Capital Management which it had borrowed to upgrade technology and remodel its stores. The loan was due on April 1.

The company also secured an extension to a credit agreement that was scheduled to expire in July 2011 and received a second lien loan for $90 million, the person who knew about the details but was not authorized to discuss them publicly said.

A spokeswoman for Borders declined to comment. Pershing Square could not be immediately reached for comment.

Last month Pershing Square's portfolio manager, William Ackman, poured cold water on speculation that the company would file for bankruptcy, reassuring investors who had worried about dwindling sales.

Borders shares briefly climbed higher on the news but ended the day down 2.4 percent at $1.74. (Reporting by Svea Herbst-Bayliss; editing by Gunna Dickson)