Blackberry Announces Restructuring of Debts Amidst Brief Halt in Share Trading

LONDON, UK / ACCESSWIRE / August 29, 2016 / Active Wall St. blog coverage looks at the headline from BlackBerry Ltd. (NASDAQ: BBRY) as the company announced on August 26, 2016, that it will redeem its 6% unsecured Convertible Debentures worth about $1.25 billion and also raise funds via issue of fresh unsecured Convertible Debentures via a private placement worth $605 million. Register with us now for your free membership and blog access at: http://www.activewallst.com/register/.

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BlackBerry is a telecommunications company engaged in the sale of smartphones and enterprise software and services. The company was founded in 1984 and is headquartered in Waterloo, Ontario, Canada, with offices across North America, Europe, Middle East, and Africa, Asia Pacific and Latin America.

Paying off Old Debts

The Convertible Debentures will be redeemable on September 2, 2016 at a price of $106.7213 which includes the principal and interest quotient. The holders of the 6% Convertible Debentures also have the option of converting them into common shares of BlackBerry. These common shares will be available at a price of $10.00 on and before September 1, 2016 at per the terms of the Convertible Debentures. BlackBerry, however, expects zero conversion of the 6% Convertible Debentures into shares, given the conversion price.

The Fresh Liability

BlackBerry also plans to raise $605 million through private placement the sale of unsecured Convertible Debentures with a 3.75% coupon to Fairfax Financial Holdings and other institutional investors. Fairfax Financial Holdings is majority shareholder of BlackBerry with 8.9% stock of the company. These will be convertible into BlackBerry common shares at $10 per share and will be due in November 13, 2020. The entire 3.75% Convertible Debentures if converted into shares represent nearly 11.57% of BlackBerry’s outstanding stock. Terms and conditions of these Convertible Debentures are similar to the 6% ones except that the new convertible debentures can only be redeemed after maturity and not before. The above transactions are subject to necessary approvals from the Toronto Stock Exchange.

Commenting on the transactions, John Chen, Executive Chairman and CEO of BlackBerry said:

“The restructuring of our convertible debt will enable us to significantly reduce our interest expense and potential future dilution for our shareholders. I am pleased that Fairfax will continue as BlackBerry’s leading lender, reinforcing its ongoing commitment to the company as we continue to execute on our strategy of pursuing growth and sustainable profitability.”

Future Outlook

BlackBerry has been facing severe challenges in the rapidly evolving smartphone sector. It has been steadily losing its market share to other handset manufacturers. In July 2016, it had launched a competitively priced Android based handset DTEK50 with advanced safety and productivity features. John Chen was confident that BlackBerry’s handset business would turn profitable by September 2016. However, market pundits and analysts do not agree with his enthusiasm especially after the company announced that it would discontinue production of its Classic model.

BlackBerry has strategically shifted its focus towards the software and enterprise solutions end of the business, where it has met with a great deal of success. Given its financial woes, the decision to get rid of expensive debt in favour of cheaper option will help the company in the long run.

Stock Performance

On August 24, 2016, BlackBerry’s shares closed at $7.97, down 0.13%, with a volume of 2.43 million shares traded. The company’s stock price has gained 4.59% in the past one month and 1024% in the last three months.

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