BlackBerry has confirmed that it will sell convertible debentures to shareholder such as Fairfax Financial Holdings in order to raise around $605 million.
On Friday the Canadian company also revealed plans to redeem about $1.25 billion in outstanding debentures, which carry a coupon of 6%, on September 2. The new debt will have a coupon of 3.75% and mature in November 2020.
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BlackBerry ends production of Classic model
According to the company, the new debt would represent around 11.57% of outstanding shares if it were converted into stock. Reuters data reveals that FairFax is the second largest shareholder in BlackBerry, with a stake of around 8.9%. The firm is led by renowned investor Prem Watsa.
BlackBerry continues to struggle in the global smartphone market, an arena that it once dominated. It appears that the company’s hardware business is dying a slow death, even as the company releases more Android-powered smartphones.
Last month BlackBerry revealed that it would no longer manufacture its Classic model. Analysts took this as a sign of a move away from handsets and a shift of focus to software.
In July this year the company unveiled a second Android-powered smartphone. The aim was to combine the best of the popular Android operating system with the security and productivity features that won BlackBerry so many fans.
A move from hardware to sofware
Sales of the first Android-powered handset, the BlackBerry Priv, were poor. Buyers were apparently put off by the relatively high price.
However BlackBerry CEO John Chen believes that the newly pared-down handset business can turn a profit by September. On the other hand many analysts believe that the company should shut down or sell its smartphone hardware business.
In afternoon trading BlackBerry U.S.-listed shares were hardly changed at $7.96.
Another sign of BlackBerry’s demise is the ending of support for its operating system by the developers of popular apps such as WhatsApp. Several companies have decided that the tiny number of remaining BlackBerry users do not warrant continued technical support.
It looks as though BlackBerry may concentrate its efforts on specialized security software. but the company appears to be making one last roll of the dice in the handset business.