BlackBerry extends purchase option deadline for additional convertible debentures

By Bla1ze on 12 Dec 2013 06:33 pm
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As we head into the Third Quarter, Fiscal 2014 Earnings on December 20th, BlackBerry has now issued a press release that will be of interest to all their investors. In an agreement met with Fairfax Financial Holdings Limited, BlackBerry has now extended their investor option to purchase up to an additional US$250 million principal amount of convertible debentures until January 13, 2014. As noted, the extension will enable BlackBerry to provide updated financial information to prospective investors after its third quarter results have been publicly released on December 20, 2013.

Press Release

BlackBerry Extends Purchase Option Deadline for Additional Convertible Debentures

WATERLOO, ONTARIO--- Dec. 12, 2013) - BlackBerry Limited (NASDAQ:BBRY)(TSX:BB), a world leader in mobile communications, announced today that it has agreed with Fairfax Financial Holdings Limited and the holders of a requisite majority of the US$1 billion of convertible debentures issued by BlackBerry on November 13, 2013 that the previously-announced investor option to purchase up to an additional US$250 million principal amount of convertible debentures has been extended to January 13, 2014. If the option is exercised, the purchase of the additional convertible debentures will be completed on or before January 16, 2014. BlackBerry has been in quiet period since the initial closing, and the extension will enable BlackBerry to provide updated financial information to prospective investors after its third quarter 2013 results have been publicly released on December 20, 2013.

About BlackBerry

A global leader in wireless innovation, BlackBerry® revolutionized the mobile industry when it was introduced in 1999. Today, BlackBerry aims to inspire the success of our millions of customers around the world by continuously pushing the boundaries of mobile experiences. Founded in 1984 and based in Waterloo, Ontario, BlackBerry operates offices in North America, Europe, Asia Pacific and Latin America. The company trades under the ticker symbols "BB" on the Toronto Stock Exchange and "BBRY" on the NASDAQ. For more information, visit www.blackberry.com.

The convertible debentures have not been and will not be registered under the U.S. Securities Act of 1933 (the "U.S. Securities Act"), and may not be offered or sold in the United States or to, or for the account or benefit of U.S. persons (as defined in Regulation S under the U.S. Securities Act), absent registration or an applicable exemption from registration requirements. This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the convertible debentures in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state.

Forward-looking statements in this news release are made pursuant to the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995 and applicable Canadian securities laws. When used herein, words such as "expect", "anticipate", "estimate", "may", "will", "should", "intend", "believe", and similar expressions, are intended to identify forward-looking statements. Forward-looking statements are based on estimates and assumptions made by BlackBerry Limited in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors that BlackBerry believes are appropriate in the circumstances. Many factors could cause BlackBerry's actual results, performance or achievements to differ materially from those expressed or implied by the forward-looking statements, including those described in the "Risk Factors" section of BlackBerry's Annual Information Form, which is included in its Annual Report on Form 40-F (copies of which filings may be obtained at www.sedar.com or www.sec.gov). These factors should be considered carefully, and readers should not place undue reliance on BlackBerry's forward-looking statements. BlackBerry has no intention and undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

88 comments

costas1966

Probably a good idea, methinks

hoob15

It's a good idea, but a bad sign.
My guess is that there hasn't been nearly the amount of interest in these debs that BB thought they would have.
And I can totally see why: debentures aren't secured, and having unsecured loans in a company just littered with breakup/takeover/go under rumours, I wouldn't want to risk my unsecured cash in them either at the moment, especially for only a 6% (I think) return.
Too much risk :S

moyjoy

Convertible dentures? Sounds fancy.

Posted via CB10

koolrosh

Can somebody explain in plain English what this means?

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Chris Umiastowski

Ok I'm putting together a quick article on this at the request of a few folks.

koolrosh

That's great. I'll wait for your article.

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imcurved

I have no idea what that implies...could someone explain? Thanks.

Posted via CB10

crazycanuck329

I second that! Lol

...we are all connected...

thedustytaco

Correct me if im wrong since im only in grade 12 accounting. I believe what they mean is to convert preferred shares into common shares. These are two types of shares we know of in the market. Generally preferred shareholders get dividend first and priority over other stuff compared to common shareholders. However, when preferred share price becomes lower than common share price, it is north worth it to convert into common shares = profit

Chris Umiastowski

sandyalisoncan, you win the prize for most useless reply. Ever. Come on man ... this is a community.

hoob15

Almost.
It's converting debentures (basically a bond that isn't secured) into common shares.
But close! You're confusing this with a convertible preferred.

TrueKulcha

Wayyyy over my head for sure lol... good reading though hahaha

Posted via CB10

bspence87

As I understand it, this means that the investors can choose to receive their investment back in shares valued at $10 per share as opposed to cash.

They also receive 6% interest per year until the investment is paid back. The max term of the loan is 7 years

So if BlackBerry is able to complete the turnaround and increase share price to say $20, the investors would cash in their bonds for one share per each $10 that they invested, even though the shares would be worth $20.

So the investors receive minimum 6% ROI, to an unlimited maximum. The risk being that if BlackBerry goes under, they receive nothing, not even their initial investment.

My numbers are from memory, but I believe this is the structure of the loan.

BlackBerry has extended the period in which these bonds are available to investors.

whatsever

Readed twice. No clue if it's any good

POSTED via my Z30 BEAST

Jerky223

Chris? Are you there Chris? Should us owing stock be concerned?

Posted via CB10

00stryder

Lol technically "Chris" wrote the article... Just not the Chris you're likely looking for. ;)

Posted via CB10

Danny Ocean

*All their investor

Posted via CB10

DrMichaelJames

This is just allowing the consortium to purchase additional debt should they like what they see. For example, if BlackBerry's results look rosey or Fairfax wants a bigger chunk of the company for whatever reason, they have until mid-January to buy additional debt. That's what I take away from it at least.

Posted via CB10

R Field

This is all it means

BlackBerry Z30 & Z10 | 10.2.1.1055 | C0006E212

CJH_

So BlackBerry are taking more debt on board?

R Field

It gives Fairfax the option to buy a extra $250 million

BlackBerry Z30 & Z10 | 10.2.1.1055 | C0006E212

alan510

If you read the fine print you will note that this is not governed by US security regulators not can it taken by any US investor. As you say, it's clearly designed for the Fairfax group.

Posted via CB10

redchilli88

would say that the take up has not been filled up hence the extension. possible reasons why the take up has not been fully subscribed are that it has not widely been advertised or there is lack of confidence in bbry.

sandyalisoncan

It's a greenshoe. The 1b was fully subscribed. This was the shoe. Probably BlackBerry wanting to raise as much as they can. Good or bad, more financial info would get people off the fence and subscribe. If you do not know what you are talking about, don't speculate.

Posted via CB10

Triniboyfella

We are all speculating here, a great percentage of the blog is on speculation is what I speculate (no actual figures to prove). Another of my speculations is on the extention. I assume BBRY thinks the upcoming quarterly results might be enough to encourage the 250M share purchase. An improvement in some way that may swerve away from the current skepticism that is obstructing the further investment.

Time will tell.

Posted via CB10

redchilli88

greenshoe or not, the fact is that "...that the previously-announced investor option to purchase up to an additional US$250 million principal amount of convertible debentures has been extended to January 13, 2014." that option for whatever reason has not been fully subscribed hence my comment/opinion/speculation (speculate: to conjecture without knowing the complete facts - http://www.thefreedictionary.com/speculate). but interesting to note that by throwing in the word greenshoe you then think have the right to speculate (you used "...Probably..."). Triniboyfella has shown more wisdom and maturity.

tbitar

Let's hope it's a good idea

Posted via CB10

sandyalisoncan

How could it be a bad idea. No one would buy before the release an way without more information.

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bspence87

What I (probably hopefully) get from this is that they expect the ER and CC to make an investment in BlackBerry very attractive..

This is supported by the odd jumps in SP the last few days, which some have speculated is from an insider ER leak.

There are many possible scenarios that could shock Wall Street :
- unexpected profit on written down z10s
- early redemption of tax credits
- BBM numbers/features update
- slew of BED contracts/numbers update
- joint ventures
- Google Play deal

There was also a 1.5mil share ($9mil) purchase made the other day, possibly a new big name investor?

Remember, the SP has already priced in a terrible ER!

ryanza

-Google Play

That would be an epic win for BlackBerry and it's users IMO.

This would allow the real BlackBerry sales force ie folk who use BB10 devices and often show and tell about the devices.

I'm installing the latest leak today and loading APK's. This must be BB10's future.

Posted via CB10

Insync

This reads as it is in addition to the $1B. So they have to Jan. 2014 to increase their stake to $1.25B convertible debt.

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BeautyEh

This sounds to me like they know the Quarter 3 numbers won't be too bad

Posted via CB10

oystersourced

Cool soft-tops all around :).

Posted via CB10

Nharzhool

uhh...Bla1ze, could you have Umi explain this to us that studied something other than business/finances?

I read that and I was just like...uhh...umm...cool?

RIMcall

This doesn't really mean much. BlackBerry is allowing the companies that financed the debt deal to have the opportunity to invest an additional $250M after results are presented next week. Odds are these guys already know what the results will look like but should they take the additional $250M it looks cleaner if it is done after the public sees the results.
My guess is that Blackberry surprises with ok results (keep in mind that this quarter the z10s are on the books at $0, so anything they sell is booked as profit). If BlackBerry is burning cash quick then the extra 250M if subscribed would be beneficial to the company

Posted via CB10

randall2580

I do not believe they are priced at zero. The were written down not written off there is a distinct difference. Under GAAP - you cannot show inventory that has value as having no value. While the Z10's value was greatly reduced as the pile got bigger and the demand got smaller, those phones were never ever fairly valued at $0.

vettsting

Good point, was thinking the same thing. Of course the inventory can't be $0, but fair valued, hence the billion $ write down already expensed. Only then anything over book value i.e cost of goods, is profit.

Posted via CB10

KenFletch

Something like this. All spec since they have not revealed actual numbers that aren't slippery.

3M phones, 2 quarters @ 400/phone = 2.4B in "sales" that were booked

they paid CRA remittances for those sales as is required since they booked them.

The phones did not sell as expected ( at $600 list price or higher).

BB takes a WRITEDOWN ( not write-off, that means they went to a landfill).
that effectively revalues(devalues) those phones on the books that totals almost 1B

so those booked sales now are 2.4B - 1B + 1.4B , over 6M phones. Or $233/phone, for a small profit.

This allows the vendors to discount the price as well. The vendors book about $300 for an on contract phone but after the accountants are done they pocket much of that so they can make a profit at this figures as well.

Cost to make a phone no more than $200. R&D is already sunk and not part of this.

Interesting side effect of this is that this means they paid way too much in taxes over 2 quarters and can get that back. Which they are applying for.

All these fugures are guesses but they are in the right ballpark. BB needs to be a company that can survive on these figures until there are enough phone in users hands that developers feel they must write Apps. The phones are great. These numbers allow phones to be given away with BES subscriptions as well.

The tide can turn and someday people may want those cool phones the business folk use again.

I think WP - will do OK but not in enterprise, X-box is MSs only hardware success. Android too messy, IT guys will be constantly frustrated by them, iPhones ... already losing the shine for many users but work very well for the average user who doesn't want to think about their phone too much. There is room for BB.

kscribs

A constructive reply, my friend

Posted via CB10

kevinnugent

But why do they need the extra $250m?? You would think this is chump change for Blackberry .... is their current financial situation so dire that they're scrapping for pennies now?

bspence87

$250mil buys them probably a year before having to claim bankruptcy, give or take

badonkadonk

More like two weeks. BBRY was pulling in 16BB for FY2013 or close to 4BB /Q and barely made a profit. Their OPEX came down by over $1B/yr in FY2013 and they still needed to cut 40% of their workforce in FY2014 just to get OPEX even lower. The $1B injection may last them one year if revenue stays up, or if they opt to cut HW entirely (and associated COGS drain on the books). 0.25B is chump change.

trwrt

I smell another awesome Super Bowl ad coming!

milo53

Need $$ for additional Jet Fuel, those commuting charges add up. LA-Kitchner, talk about Carbon footprint, BB sure is not very "Green"

blackberry artichoke

I actually think it's a smart move. I thinks it necessary in the event that we have a bad 3rd quarter. It shows that we have a great company backing BlackBerry!

Posted via CB10

BBOttawa

Thinking it's a positive, as it is allowing investors to buy after the earnings report as others have said. But could be a negative if it means they really need an extra $250 million...

zten

250 million? That's barely any money for blackberry to do anything with but buy a new jet.

Posted via CB10

vettsting

Approx 500 Cessna's actually.... you know, single engine prop planes. will get you from Waterloo to T.O in about 1 hr.

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Shanerredflag

They don't "need" anything...it's simply a carrot (so to speak) for lending (if they even use it, as yet they have not) the initial 1B.

In English....its a perk if and when FF wishes to enforce the option....like an option to purchase on land or a house.

Posted via CB10

Kingdmen

And now in English please

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Shanerredflag

And someone please translate into old Slavic too...

Posted via CB10

chrizrun30

Reading it double twice and still no enlightenment for me.
Where are are you Chris?

FryBerry

Just my opinion, but I am thinking that the quarterly numbers may show some promise. If they were going to be poor numbers BB wouldn't think anyone else would want to climb on, but with decent numbers, they may be about to get another $250M out of someone.

BBNation

Doesn't it also mean BlackBerry is desperate for more cash and allowing investors more time to put that 250 mil in BlackBerry.

Posted via CB10

jsocan

Not good optics for sure. BlackBerry needs more cash and is willing to change the terms to suit the lenders. The lenders aren't eager to put in more cash from what they've seen from BBRY 's books and turnaround plans. Not very confidence inspiring, is it?

bspence87

But why do BlackBerry think that the ER will change that?

Just using it as an excuse?

blackberry artichoke

I also see it as a way to build confidence in BlackBerry

Posted via CB10

GTiLeo

didn't they already get the billion in november, i remember readign this, are they doign another 250 million?

tushargkwd

I think that the numbers will be better than the last quarter and that they have announced another 250mil has already been discussed and would help project a positive image of BlackBerry in the media and among the Citi and other Financial institutions.

BlackBerry has done better with z10 sales this time around... but I know that it will be far from profit.

I'm optimistic that BlackBerry will turn into profit in another 3Q or so... and the 965mil $ write off was a one time case.

They have been more cautious with the q10 and hence we see the prices still high with marginal cuts..

They will do better this time... :)

Posted via CB10

tonyblaze

Doesn't make sense... waiting for Chris to explain this... lol

Dev. of "Data Usage Counter", "Alarm+", "Recycle Bin" for BB10

khehl

i'm with you on that bud

AtInsider

All in all, this is good news,

LP_Rigg

This is not good news to anyone paying attention or has a modicum of investor knowledge. Doom and Gloom? Not necessarily. But it does portend wariness in potential debt holders "investors"

BB10 is a great product and I wish Chen all the best in the turnaround

Posted via CB10

markmall

No matter how much cash they raise, unless they start advertising and marketing and create some interest in their fine operating system, it is just a slow (or fast) death.

Does Chen want to turn BB into software company or a services company or what? Where are the ads for BB10? Or the Z30?

bidagreat1

I'm with you in that...... BlackBerry Z30 has launched and I still don't see any advertising. I don't see BlackBerry advertising period. This is disappointing considering that I always boast about my Z10 and brag about the new Z30 to Android & iPhone owners just to watch them scratch their heads and say, "what's a Z10 and a Z30"?................................ Chen do something!!!

Posted via CB10

KenFletch

The original financing deal had an option for the same investors to loan another $250m. This announcement delays the closing date of that option. Really no way for us to know if that is good or bad for BlackBerry Or those investors.

Liquidity is good for BlackBerry and BlackBerry is suggesting that the investors might want more.

Fit the market seeing big sophisticated investors getting in can only help as it is a show of confidence.

Also since this debt is potentially shares as well as debt it makes a break up much less likely.

More like Chen said the company will carry on all of its various businesses

Posted via CB10

kennyiceberry

Yes. I agree that it is difficult to determine whether this news is absolutely negative or absolutely positive. Most likely the opportunity to squeeze an extra $250M (Canadian? ) out of the offer was there ; it's logical to take that opportunity, no? A run down of convertible debentures, for those who need one : http://www.incomeresearch.ca/referenceConvertableDebentures.php

Posted by the inimitable Z10 handheld system

SparkyBC

A person is better off investing in pennies stocks before buying into blackberry again. I sold off all my shares at $15. No way in h3ll it will ever get back to that level again. The stock price won't ever get any better. They will slowly fall down down down...

Speedygi

It's very likely they are recoup some of their losses this way...

Posted via CB10

vettsting

This doesn't affect losses, or profits for that matter. It's only cash that they will get with in turn becomes debt that they will have to pay off.

Posted via CB10

RagnarLodbrok

Anyone seen a galaxy note 3?

They are fucking sweet.

Written on a z10

Posted via CB10

kennyiceberry

That ain't but nothing. I've seen things you people wouldn't believe...Attack ships on fire off the shoulder of Orion, I watched c-beams glitter in the dark near the Tannhäuser Gate...

Posted by the inimitable Z10 handheld system

Comfort4Ehsan

BlackBerry is a secure enough debtor, and the 6% is pretty much dead low commercial bond/debenture offered to it at its worst situation is the proof.

It wanna raise its cashflow to ensure a flawless transitioning of its business offerings and portfolios. Cutting cost comes at hefty in-advance one-time charges. It needs to shed all that. I think it's a very positive sign. They also set the trust high when they're only accepting and asking for $250M more. That's excellent. It signals calculations are done, planning and cost schedule is available, and that's their worst case scenario need in cash.

Posted via CB10

andy957

Just noticed that BBRY stock is back up above $6, right now at $6.07. I don't understand how the stock market works, just mentioning this for those who are interested.

SoxFan

The extension means they have been unable to fill the green shoe so far. This means they are having a hard time raising as little as $1.25 billion in debt, which means they are basically tapped out.

The problem is that the company is hemorraghig cash. That's why they and provious buyers were have been unable to raise much money. They had previously announced that the then $2.5 billion cash on hand and $1 billion in new debt would last them through 2014. That's a burn of about $3.5 billion in 15 months. So $250 million probably buys them an extra 1-3 months.

This debenture itself is not bad news for shareholders in that the stock would have to be up over $10 share in order for them to convert: it's the same as selling $1 or $1.25 billion in stock at $10/share. The add'l dilution comes with the territory. But it is bad news that they are having trouble filling to the green show and raising that extra $250 million. That means as more investors look at the company as more time passes, they don't like what they see.

Posted via CB10

ankush77

need more comprehensive article to get more insight ????

KenFletch

Occam's razor .... in means Fairfax's investing partner's wanted more time, specifiacally time after the ER. That's what it means. OTOH ... it may mena to obverse , they didn't feel comfortable going in deeper before the ER.

between the lines . Watsa is on the board. He is an insider. The debenture holders are not ( he is both). He can't share what he knows. He knows them well. He probably knows if the ER is very bad they won't go in deeper, why bother extending the deal if it is a definite NO. Chances are he knows the ER will be OK and they will take another bite but he can't share inside info.