After ten days of seeming to deny the obvious — and pissing off the publisher/debtors who could help it by acting oblivious — Borders Group Inc. has hired bankruptcy and restructuring attorneys, according to a Saturday report in the Wall Street Journal by Mike Spector and Jeffrey A. Trachtenberg.

The two report that “Borders has chosen law firm Kasowitz, Benson, Torres & Friedman to advise on its current refinancing efforts,” although “Kasowitz’s instructions are to keep the company out of bankruptcy court.”

In fact, according to the WSJ report, these same attorneys were making the pitch to publishers last Thursday “on a plan to defer payments and is talking with GE Capital about providing a new revolving credit facility that would replace existing debt ….”

How significant is the deferral (of a repayment that is in several cases in the tens of millions of dollars?) — “Borders is asking vendors to defer payments in exchange for an interest-bearing promissory note of about three years in duration,” says the WSJ report. And a New York Times report adds that publishers have been told they only have until February 1st to accept the deal, or Borders will shoot the puppy.

In a business that’s all about cash-flow, it’s an enormous expectation, and yet Borders is not likely to get the refinancing from GE unless publishers make the concession. According to the WSJ’s inside source, “GE wants publishers to show ‘shared sacrifice.'” That way, Borders wouldn’t have to spend so much of its new cash immediately.

Still, it represents a huge amount of money for publishers, although the report does say that Borders floated a “possible sweetener” to them at last week’s meeting: “collateral for the note” … although “what form that collateral might take could not be learned.”

While it’s safe to say the publishers would like to see Borders stay in business — and indeed, several have been generous in their terms with the company for years in an effort to keep it affloat — many still seem to think BGI’s bankruptcy lawyers should be used for, well, you know ….

As one publisher tells Spector and Trachtenberg, “”It’s hard to tell what will happen at this point,” but “None of the alternatives are great.”