The largest investor in struggling BlackBerry has exercised its option to acquire an additional US$250m of convertible debentures, providing the smartphone maker with a much-needed capital injection.
Fairfax Financial Holdings – which owns 9.9% of…
The largest investor in struggling BlackBerry has exercised its option to acquire an additional US$250m of convertible debentures, providing the smartphone maker with a much-needed capital injection.
Fairfax Financial Holdings – which owns 9.9% of BlackBerry’s stock – has now doubled the amount of the company’s debt it holds. The US$250m were acquired in the initial US$1bn offering of 6% unsecured subordinated convertibles last November.
Fairfax and the other investors had an option to acquire a further US$250m by 13 December, but BlackBerry pushed that deadline back to mid-January to allow potential investors time to analyse its Q3 results.
BMO Capital Markets acted as the sole bookrunner and placement agent for the transaction.
In a statement Fairfax said that if it were to convert its US$500m of the debt, it would hold 17.6% of BlackBerry’s share capital, or 15.6% if the other holders of the debentures converted theirs too.
BlackBerry said the transaction will be completed on or before 16 January 2014. The Canadian handset maker offered the notes after a US$4.7bn takeover for the company launched by Fairfax collpased. The deal fell apart after Fairfax failed to persuade other investors to join a lending syndicate.
BlackBerry’s share price suffered after the sale fell through and when its Q3 results were announced. However this week, its shares have risen by more than 12% and are trading at their highest since last September, US$8.54, giving the company a market capitalisation of US$4.4bn
Market commentators have attributed the turnaround to the company’s new head, John Chen. Yesterday Chen was quoted as saying the company will refocus on keyboard-based smartphones after a failed experiment in touch-screen handsets last year. BlackBerry is looking to move back to the corporate and government clients that made it successful in the first place.
