In financial documents filed this week, BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) said this week that it is expecting “a significant income tax refund,” that many analysts expect could reach $500 million (US) for the Canadian company. That sort of cash infusion is always welcome but specifically for a company that is expected to be acquired in the next year. It also may open up the bidding field as companies won’t need to borrow as much to make the sale happen.
BlackBerry has no debt
Presently, BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) has seen a conditional bid of $4.7 billion from Fairfax Financial Holdings Ltd (OTCMKTS:FRFHF) (TSE:FFH) who signed a letter of intent last month. It is also believed that there are a number of other private-equity groups that are interested in the once dominant smartphone manufacturer. While BlackBerry has no debt, its business is hemorrhaging cash, making it less likely that banks will give it the cash it needs.
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Though based in Waterloo, Ontario, Canada the company pays income tax in numerous countries. In June, BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) reported a significant tax refund from the Canadian government during the first quarter, relating to its taxes for fiscal 2013. It appears from the disclosure that that refund was more than $500-million (Canadian).
Fairfax is currently on the market for debt financing in advance of its conditional offer for BlackBerry. Its believed that Fairfax has been in talks with both the Bank of Montreal (NYSE:BMO) and Bank of America Corp (NYSE:BAC). Obviously, $500 million would go along ways towards securing the loan given BlackBerry’s uncertain market prospects and almost non-existent sales of its newest model phones. Any bank that is willing to give Fairfax its debt financing would smile on the return but would certainly conduct its own due diligence with regards to the refund.
Fairfax Financial Holdings Ltd (OTCMKTS:FRFHF) (TSE:FFH), the insurance and investment firm led by Prem Watsa, is offering a conditional $9 a share for the company. They do, however, face a potential fight with Cerberus Capital Management of New York.
Company founder and former co-CEO Mike Lazaridis is also rumored to be interested in taking part in a bid for BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB), though the company has declined comment. Mr. Lazaridis is also one of the company’s largest shareholders.