Borders to cut 2009 costs by $120 million

The bookstore chain, which struggled with liquidity issues last year, also said it had additional funding of $194 million under its credit agreement as of January 31, but warned the amount was not necessarily indicative of its future funding capacity.

Its comments in the U.S. Securities and Exchange Commission filing came a day after it posted a 57-percent drop in quarterly earnings.

In the filing, Borders said it has suspended investments in its international business, and that if pursued, any further growth overseas would profit most by using a franchise model.

Borders, the No. 2 brick-and-mortar book seller behind Barnes & Noble has laid off workers and slashed costs aggressively as it fights weak sales and online competition.

Borders has also extended by one year its $42.5 million senior secured term loan with its largest shareholder, Pershing Square Capital Management.

Borders posted a 12.9-percent drop in fourth-quarter sales, with its international sales, consisting primarily of its Paperchase business, down 21.7 percent.

The bookseller plans to continue allotting less space to music- and movie-related items during 2009, while devoting more shelves to gifts, stationery and books.

Borders also said that three former employees filed a lawsuit against it on behalf of those who worked as general managers in its California Borders stores from February 19, 2005, to February 19 this year. The complaint alleges, among other things, that Borders did not pay those employees required overtime or give them meal and rest times.

Borders also said another lawsuit had been filed against it in California in March on behalf of customers who got its gift cards from March 2005 to March 2009. That complaint alleges that Borders sells gift cards that are not redeemable for cash, violating a specific California Business and Professionals Code, Borders said.

(Reporting by Aarthi Sivaraman; Editing by Derek Caney and Maureen Bavdek)