UPDATE 2-Barnes & Noble unlikely to bid for Borders - WSJ

(Adds no comment from both sides; adds dateline)

SAN FRANCISCO, Aug 14 (Reuters) - Barnes & Noble Inc (BKS.N), the largest U.S. specialty bookseller, is unlikely to make a bid for rival Borders Group Inc (BGP.N), The Wall Street Journal said, citing people familiar with the situation.

Barnes & Noble said earlier this year that it was looking into a potential acquisition of Borders, its rival and second-largest U.S. specialty bookseller.

A spokeswoman for Barnes & Noble said on Thursday that the company had no comment on the newspaper report, while a Borders spokeswoman said the company was continuing to evaluate its alternatives.

Borders, which put itself up for sale in March, struggled with liquidity issues this spring before receiving new financing from its largest shareholder. It has been closing underperforming stores and taking other steps to turn around its business.

Barnes & Noble's decision not to bid reflects in part the tight lending markets that would make it difficult to arrange bank financing, the Journal said.

The retailer was also known to be concerned about the length of some of the leases that Borders has signed, according to the paper.

Borders hopes to complete the auction by the end of September, the Journal said, citing a person close to the company.

Booksellers, like many U.S. retailers, have come under pressure as rising gasoline and food prices curb consumers' discretionary spending. The sector also faces stiff competition from a host of online rivals, particularly Internet giant Amazon.com (AMZN.O). (Reporting by Alexandria Sage in San Francisco, Martinne Geller in New York and Ajay Kamalakaran in Bangalore; editing by Will Waterman and John Wallace)