BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) announced Friday that it has completed the acquisition of $250 million in debentures by Fairfax Financial Holdings. It was on top of $1 billion that the Canadian company raised from a consortium of investors led by Prem Watsa. Fairfax Financial had the option to purchase an additional $250 million of debentures. The debentures, which will yield a 6% interest, are convertible into common stock at $10 each. That’s a 17% premium to BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB)’s closing price on January 16.
Fairfax doubles its holding of BlackBerry debt
Fairfax Financial said that it acquired the convertible debentures for investment purposes. With this, Prem Watsa has once again demonstrated his faith in the turnaround of BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB). The latest debenture purchase has almost doubled Fairfax Financial Holdings Ltd (TSE:FFH)’s holding of BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB)’s debt, giving more breathing room to the ailing smartphone maker. Prem Watsa owns about 14% of the company’s total equity. BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) had zero debt before it raised $1 billion in convertible debentures in November 2013.
BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) posted disappointing third quarter results last month. The company posted a loss of $4.4 billion after taking $4.6 billion in inventory, restructuring, impairment and other one-time charges. However, its new CEO John Chen unveiled a restructuring plan that seemed more realistic, boosting investors’ confidence.
Chen has plans for BlackBerry’s turnaround
Chen said the company will focus on its core enterprise business. BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) also signed a 5-year deal with Foxconn Technology Co., Ltd. (TPE:2354) to manufacture low-cost smartphones for the Canadian company. The Taiwanese vendor will launch its first BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) smartphone codenamed “Jakarta” in April 2014 in Indonesia. The deal will help BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) reduce costs and inventory risks.
John Chen has plans to make BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) a profitable business by the end of 2016. If he succeeds, he will be the tech industry’s one of the most successful CEOs. The stock has gained more than 38% since December 17, 2013. As a result, short interest in BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) has declined from 150.7 million to 107.2 million by December 31.
BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) shares fell 0.12% to $8.55 at 9:32 AM EST.
