Borders issues warrants to shareholder Pershing

SAN FRANCISCO (Reuters) - Borders Group Inc (BGP.N) said on Wednesday it issued warrants to its largest shareholder, Pershing Square Capital Management, after the bookseller failed to find a buyer by a prearranged deadline.

According to an agreement signed in April, Borders was to issue warrants to Pershing to buy an additional 5.15 million shares of common stock on October 1 if Borders had not signed by then a definitive agreement related to a sale.

On Wednesday, Borders said it issued those warrants at $7.00 per share.

Borders, the No. 2 specialty book seller behind Barnes & Noble Inc (BKS.N), said in March it was exploring a sale.

Borders had liquidity issues earlier this year before negotiating a $42.5 million financing deal with Pershing. That deal gave Pershing 9.55 million warrants to buy Borders stock at $7.00 a share, as well as the additional warrants issued on Wednesday.

Pershing, which is led by activist investor and hedge fund manager William Ackman, owns 29 percent of Borders, according to an April filing with the U.S. Securities & Exchange Commission. That percentage does not include the additional warrants received on Wednesday.

Borders shares were up 10 cents at $6.66 in midday trading.

(Reporting by Alexandria Sage, editing by Gerald E. McCormick)