Bill Ackman's Pershing Square Files 13D on Borders, Covers MBIA Short ~ market folly

Monday, January 26, 2009

Bill Ackman's Pershing Square Files 13D on Borders, Covers MBIA Short

Pershing Square Capital Management, the hedge fund ran by Bill Ackman, has filed an amended 13D with the SEC and has disclosed a 33.62% ownership stake in Borders (BGP). According to the filing,

"As of January 16, 2009, as reflected in this Amendment No. 9, the Reporting Persons are reporting beneficial ownership on an aggregate basis of 25,297,880 shares of Common Stock (approximately 33.62% of the outstanding shares). This includes warrants covering 14,700,000 shares of Common Stock, which represents 9,550,000 warrants received on April 9, 2008 and 5,150,000 warrants received on October 1, 2008 (each, as previously disclosed). The Reporting Persons own cash settled, total return equity swaps covering 4,805,463 notional shares of Common Stock (as previously disclosed). The notional shares that underlie such swaps are not included in the totals set forth in the charts earlier in the Schedule 13D. The aggregate economic exposure of the Reporting Persons to shares of Common Stock, including the aggregate shares of Common Stock beneficially owned by the Reporting Persons plus the aggregate notional shares underlying such swaps, represents approximately 40% of the sum of the outstanding shares of Common Stock and the shares of Common Stock underlying such warrants. "

Additionally, Pershing has "extend the deadline for repayment of the $42,500,000 senior secured term loan" that is owed to them by Borders. The full text of the arrangement (a.k.a. fun legal jargon) is available in the SEC filing.

Also worth noting is that Ackman's Pershing Square has covered his short position in bond insurer MBIA (MBI). They have closed their short position and sold their credit default swaps. This ends a long and well documented battle between the two parties.

We've recently covered Ackman's recent SEC filings here and the rest of his portfolio holdings here.

Taken from Google Finance,

Borders "through its subsidiaries, operates book, music and movie superstores, and mall-based bookstores. The Company's operating subsidiaries include Borders, Inc. (Borders), Walden Book Company, Inc. (Waldenbooks) and Borders Australia Pty Limited. As of May 3, 2008, the Company operated 547 superstores under the Borders name."

MBIA is "engaged in providing financial guarantee insurance and other forms of credit protection, as well as investment management services to public finance and structured finance issuers, investors and capital market participants on a global basis."

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