BlackBerry Gets More Capital From Watsa’s Fairfax

BlackBerry Gets More Capital From Watsa’s Fairfax
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BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) received an additional $250 million in debentures connected to a $1 billion financing agreement in November with Fairfax, the Canadian company announced on Wednesday. The Prem Watsa-led group has chosen to go ahead with the previously agreed option to acquire the notes. The debentures pay 6% interest, and can be converted into shares for $10 each.

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BlackBerry shares up

The Prem Watsa-headed Fairfax stated that it was acquiring the convertible debt for investment purposes. By acquiring the additional debenture, Fairfax will almost double its holdings in BlackBerry debt, which in turn will give upside to BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) shares in the market.

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BlackBerry shares have surged 15% since the end of 2013 to close at $9.20 on the TSX Wednesday.

As of now, the Prem Watsa-led company has 14% equity stake in BlackBerry, which was debt free before the financing deal. Fairfax has given investors a time up to January 13 before buying additional BlackBerry debt, so that the investors could get to know the latest financial information provided by the company on December 20th.

Chen devising a turnaround

In its earnings conference call, BlackBerry CEO John Chen discussed the future plans of the company and how he plans to return to profitability in fiscal 2016 after a year over year drop in sales and sagging performance of the new line of BB10 smartphones.

For the third quarter, the Canadian company posted a loss of $4.4 billion on non cash asset impairment and restructuring charges. Its cash position increased $3.2 billion including proceeds from the initial convertible offer.

CEO Chen stated that BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) would target the business customers followed by launch of a touch screen smartphone in Indonesia under $200 price point. Also, the company entered into a new five year partnership with Taiwan’s Foxconn Group, the world’s largest manufacturer of electronic parts.

Foxconn would manufacture the low priced BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) handsets along with managing inventory. In the process, BlackBerry would work on the software and design of the high end phone. According to Chen, the partnership would help to bring the cost down and to reach the breakeven point.

During the Consumer Electronics Show in Las Vegas, Chen said in an interview with Bloomberg that the company would utilize its intellectual property more aggressively “to gain some business benefits from our ownership of patents.”

During the show, AT&T chief Ralph de la Vega said that the company will continue to support BlackBerry and put greater effort in to selling phones with physical keyboards, which are popular with business and government customers.

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Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at
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  1. Please! I have a “enigma”. “The debentures pay 6% interest, and can be converted into shares for $10 each.” What me I understand is BBRY pay 6% for 250 mil$ at Fairfax and in any time Fairfax can convert its 250 mil$ in 25 mil share (1 share= 10$). That’s correct ? I’m afraid no but …
    Looks as a good news because Fairfax trust in BBRY but share will be diluted?
    Thank you

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