Borders, the American-owned bookstore chain, could be up for sale after it suspended its dividend and hired advisers to review options for the business.

The company blamed a weakening economy and higher borrowing costs for slowing sales. It has posted losses in seven of the last eight quarters.

The UK arm of the company was bought by Channel 4 chairman Luke Johnson for £10 million last year.

Chief executive George Jones said: "We will be slowed in our progress and expect that we'll reach them later than originally anticipated.

"Still, we believe that our strategic plan remains the right path toward achieving these goals."

Pershing Square Capital Management, Borders' largest shareholder, has agreed to bail it out by lending it $42.5 million and making an offer for some of the bookstore chain's international businesses.

Mr Jones said: “The company determined that additional capital was required to execute our operating plan.The current credit environment has made many of these alternatives prohibitively expensive or entirely unavailable.”

The company faces stiff competition from online retailers and grocery stores for sales of books, CDs and DVDs. Shares have dropped by 66 per cent in the last year.

Borders reported a net profit of $64.7 million in the three months to the end of December compared with a loss of $73.6 million, a year earlier when it took large charges associated with the closing of Waldenbooks stores.

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