Fairfax Financial Holdings Ltd will buy another $250 million worth of BlackBerry Ltd’s convertible debentures, the companies said Wednesday, providing the struggling smartphone maker with much-needed cash.<\/p>\n
The move by Fairfax, the Canadian property and casualty insurer run by investment guru Prem Watsa, will double the company’s holdings of BlackBerry’s debt. Fairfax also owns a 9.9 percent equity stake in BlackBerry, making it the company’s largest shareholder.<\/p>\n
Fairfax is exercising a previously announced option linked to BlackBerry’s recent $1 billion debt financing, in which it had initially bought $250 million.<\/p>\n
Other backers of the initial offering included an arm of Qatar’s sovereign wealth fund, Brookfield Asset Management, and Markel Corp. Canso Investment Counsel Ltd had bought $300 million.<\/p>\n
The offering followed an aborted attempt by BlackBerry to sell itself amid spiraling losses and shrinking market share in the brutally competitive smartphone industry.<\/p>\n
The Waterloo, Ontario-based company last month reported a massive quarterly loss as its newest devices have failed to catch on.<\/p>\n
Before the deal BlackBerry carried no debt. Analysts noted the debt investment strengthened Fairfax’s influence over BlackBerry, but offered less downside risk than an increased equity investment would have.<\/p>\n
The debentures pay a 6 percent coupon. The private placement could eventually increase the number of BlackBerry shares by almost 20 percent.<\/p>\n
After excusing himself from BlackBerry’s board during its failed sale process after submitting a bid, Fairfax’s Watsa rejoined as lead director and head of its compensation committee when the initial offering was announced.<\/p>\n
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