For BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB), as of now, the offer made by Fairfax Financials, for $9 billion backed by $3 billion in bank loans and $1.2 million in bridge loans to be repaid with BlackBerry’s own cash, looks the “most likely scenario,” according to Jefferies analysts Peter Misek, Jason North and Billy Kim. If bridge loans cannot be secured then the last option would be to lower the bid to $7.


 Analysts at Jefferies note that there is no possibility of any other bidder for BlackBerry.

Options available to Fairfax

Fairfax has secured $3 billion through bank loans, but still has to arrange for $1.2 billion to fund the $4.7 billion deal. According to the analysts, Plan A for Fairfax is to get co-investors, but investors look reluctant as far as BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) goes.

Another option for Fairfax might be to get bridge loans for 6 months for $1.2 billion and then use BlackBerry’s own cash to pay it back once the deal is concluded.

Plan C for Fairfax would be to lower the bid to $7, and this might be the last option available for the Fairfax financials, but Prem Watsa may receive a taint on his image by lowering the bid.

2Q OPEX better than Jefferies estimate

For the second quarter of 2013, operating expenditure (OPEX) was better at -16 percent quarter over quarter against Jefferies estimate of 12 percent. For the financial year 2014, estimates are high due to lower operating expenditure, but are less than the Street expectations. According to analysts, revenues and gross margin are lower due to the lower services contribution.

Other bidders for BlackBerry uncertain

There are other bidders who are interested in BlackBerry’s services business and OS, but not in the handset unit. However, they are finding it difficult to detach the handset arm from services and OS. BlackBerry’s most viable option is to agree to Fairfax deal.

If BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) fails to accept the bid from Fairfax, stocks of the company are likely to trade in the lower portion of salvage value due to factors such as different variables, overall uncertainty, and the timing of the MDM opportunity.

Jefferies analysts have a Hold rating on BlackBerry with a price target of $8, based on a 60 percent weighting for Plan B ($9), 20 percent weighting for Plan C ($7), and 20 percent weighting for a $5-7 salvage value.