Borders Group Finalizes Improved Financing Agreement with Pershing Square

ANN ARBOR, Mich., April 7, 2008 /PRNewswire-FirstCall/ -- Borders Group, Inc. NYSE: BGP today announced that it has finalized a revised financing agreement with Pershing Square Capital Management, L.P. The agreement features terms that are more advantageous to Borders Group than Pershing Square's original financing commitment described in the company's March 20 news release and March 21 8-K filing.

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"We are pleased to have reached a final financing agreement with Pershing Square that includes more advantageous terms and still provides Borders with the necessary funding to continue implementing our key initiatives," said Borders Group Chief Executive Officer George Jones. "The process of reviewing alternative financing proposals over the past two weeks was beneficial as it yielded an outcome that is better for our company and our shareholders. We are pleased to have the backing of Pershing Square, our largest shareholder, as we move forward and we appreciate their continued confidence. Borders is now turning its focus to the broader strategic alternatives process."

The revised financing agreement consists of the same three components that were in the original Pershing Square commitment, but with specific revisions as follows:

     - A lower interest rate of 9.8% on the $42.5 million senior secured term
       loan. The original Pershing Square financing commitment carried a 12.5%
       interest rate.

     - An increased backstop purchase offer ("put") of $135 million for the
       international subsidiaries. The original Pershing Square financing
       commitment included a purchase obligation at a price of $125 million.
       As previously stated, Borders Group believes its international
       subsidiaries are worth substantially more than the amended backstop
       purchase offer price and the company has retained the right to continue
       its ongoing strategic alternatives process for these businesses.

     - A reduction in the number of warrants issued at closing to Pershing
       Square to 9.55 million warrants to purchase company common stock at
       $7.00 per share and a reduction in the term of all warrants issued to
       Pershing Square from 7.5 years to 6.5 years.  The original Pershing
       Square financing commitment included 14.7 million in up-front warrants
       at $7.00 per share. Under the new agreement, Borders Group is required
       to issue an additional 5.15 million warrants to Pershing Square if any
       of the following three conditions occurs: the company exercises the put
       related to the sale of the international subsidiaries, a definitive
       agreement relating to a change-of-control of the company is not signed
       by October 1, 2008, or the company terminates the strategic
       alternatives process.

The financing agreement was unanimously approved by the disinterested members of the company's board of directors after a full review by the company and its financial and legal advisors of the Pershing Square agreement and other alternatives. It has also been approved by the lenders under the company's revolving credit facility. The full text of the Borders Group financing agreement with Pershing Square will be filed by the company with the Securities and Exchange Commission in a Form 8-K.

J. P. Morgan Securities Inc. and Merrill Lynch & Co. acted as financial advisors to the company in the evaluation of its financing alternatives and Merrill Lynch & Co. provided a fairness opinion to the board of directors regarding the financing.

About Borders Group

Headquartered in Ann Arbor, Mich., Borders Group, Inc. is a $3.8 billion retailer of books, music and movies with more than 1,100 stores and over 30,000 employees worldwide. More information on the company is available at www.bordersgroupinc.com.

Safe Harbor Statement

This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. One can identify these forward-looking statements by the use of words such as "projects," "expect," "estimated," "look toward," "going forward," "continuing," "planning," "returning," "guidance," "goal," "will," "may," "intend," "anticipates," and other words of similar meaning. One can also identify them by the fact that they do not relate strictly to historical or current facts. These statements are likely to address matters such as the company's future financial performance (including earnings per share growth, EBIT margins and inventory turns, liquidity, same-store sales growth, and anticipated capital expenditures and depreciation and amortization amounts), its exploration of strategic alternatives, its financing agreement with Pershing Square and the benefits thereof, strategic plans and expected financing and benefits relating to such plans (including steps to be taken to improve the performance of domestic superstores, the downsizing of the Waldenbooks Specialty Retail Segment and the development of a proprietary Web site). These statements are subject to risks and uncertainties that could cause actual results and plans to differ materially from those included in the company's forward-looking statements. These risks and uncertainties include, but are not limited to, consumer demand for the company's products, particularly during the holiday season, which is believed to be related to general economic and geopolitical conditions, competition and other factors; the availability of adequate capital to fund the company's operations and to carry out its strategic plans; failure to close the financing agreement with Pershing Square; the performance of the company's information technology systems and the development of improvements to the systems necessary to implement the company's strategic plan, and, with respect to the exploration of strategic alternatives including the sale of certain parts of the company or the sale of the entire company, the ability to attract interested third parties.

The company's periodic reports filed from time to time with the Securities and Exchange Commission contain more detailed discussions of these and other risk factors that could cause actual results and plans to differ materially from those included in the forward-looking statements, and those discussions are incorporated herein by reference. The company does not undertake any obligation to update forward-looking statements.

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