It looks as if the credit crunch has claimed its first big retail scalp. Last week, US book- seller Borders had to seek emergency funding to the tune of US$42.5 million (£21.3 million) from shareholder Pershing Square.

The retailer, already suffering from the migration of entertainment sales online and having booked a US$125.7 million (£63.1 million) loss on the sale of its UK arm, needed more money simply to keep on running according to plan.

But, in the words of Borders chief executive George Jones, the credit environment made sources of cash “prohibitively expensive or entirely unavailable”. Without Pershing’s support, “liquidity issues may have arisen in the next few months”. The retailer has now begun a strategic review and may be sold.

Is Borders’ plight likely to be replicated on this side of the pond? The US has been ravaged more than Britain by the credit crunch, so retailers there will be squeezed harder. But the nervous investment mood means UK store groups still face a rough ride. Despite their protestations that all is well, highly leveraged public companies are likely to trade at paltry valuations for the foreseeable future.

Debenhams, for instance, ticked sharply up last week after a reassuring trading update. Nevertheless, the retailer remains very lowly valued – a sign that investors are still wary of debt close to£1 billion.

Similarly, private equity backed retailers’ debt is trading at well below face value. Fat Face’s debt is said to be changing hands at just 60p in the pound, indicative of concern that such companies may be worth less than they owe.

In this cold climate, directors might as well take their eyes off the dealing screens, ignore the debate about valuations and concentrate on running the business.

M&S row is a distraction

In the latest twist of M&S’s corporate governance spat, chef executive Sir Stuart Rose has been challenged to stand for re-election. Rose might legitimately be questioned on why he should be executive chairman, but rebel investors should ask themselves whether prolonging the row makes sense.

Perversely, corporate governance strictures could be blamed for the problem. Had Kevin Lomax not insisted on pushing out Paul Myners a couple of years back, for supposedly being too close to Rose, the retailer might still have a trusted chairman and a highly regarded chief executive.

George MacDonald is deputy editor of Retail Week