58 year-old John Chen, who took the post of new executive chairman and interim chief executive officer of BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) on Monday, has agreed to a pay package of nearly $90 million. The man tasked to do the impossible(?) at BlackBerry is set to receive a salary of $3 million in salary and bonuses as well as $85 million in restricted stock that will vest over the next five years. While that might seem like a tremendous amount, he has his work cut out for him as he replaces Thorsten Heins. If he’s able to turn the former smartphone giant around he will be worthy every cent.
BlackBerry banking on Chen; Fairfax deal falls though
Chen’s taking of the reins came on the same day that Fairfax Financial Holdings Ltd (TSE:FFH). announced that it was taking its tentative bid for BlackBerry off the table. In lieu of the $4.7 billion offer for the company, Fairfax has instead chosen to put together a bond deal aimed at improving BlackBerry’s cash position. Fairfax Financial Holdings Ltd (TSE:FFH) disclosed the other investors that would join the firm in a regulatory filing yesterday. The group includes Brookfield Asset Management Inc.(NYSE:BAM) (TSE:BAM.A) and Qatar Holding LLC among others.
The $88 million package was reported by Bloomberg and BlackBerry, as of this writing, has stayed quiet on the issue. It’s also believed that if Chen is removed without cause, he will receive his rest of the year’s salary along with a one-time payment of $6 million.
Chen cut his teeth at Sybase Inc., while turning the company around under his stewardship. While that was no small task, turning BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) around may just prove to be to much of an ask.
Purchasing BlackBerry shares is certainly a gamble but Sameet Kanade of Jacob Securities believes that the bond offering is a safe investment as debt holders will be given the first opportunity to seize BlackBerry’s assets in bankruptcy.
“On the downside, you’re protected,” Kanade said. “And on the upside, you could make a killing.”
Presently, if sales remain stagnant and BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) continues to spend at current rates, the company will run out of money next year.
Tax rebate and Fairfax to help with cash inflow
It was being reported earlier this year that BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) was nearly assured of a tax refund of $500 million dollars that would allow BlackBerry the cash to operate for an additional quarter. Anonymous sources are now telling Bloomberg that BlackBerry is asking for double that rebate and also that it is expedited in a timely matter.
The Fairfax Financial Holdings Ltd (TSE:FFH)-led debenture is expected to be finished in two weeks according to the filing yesterday. If it hasn’t closed by Nov. 27, any of the parties will be free to terminate the agreement.
If BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) were to be sold the termination fee to the bond investors will find itself somewhere between $135 and $200 million depending on numerous variables.
Brookfield’s “portfolio managers believe the debentures are an excellent investment,” Andrew Willis, a spokesman for the company, said in an e-mail.
Fairfax Financial Holdings Ltd (TSE:FFH) and its partners are restricted from selling their debentures for at least a year after purchasing them, according to the filing.
