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August 30, 2016

BlackBerry to raise $605m through sale of debentures

The mobile data security giant will redeem $1.25bn of debentures.

By CBR Staff Writer

BlackBerry has sought to raise $605m through the sale of convertible debentures to its investors including Fairfax Financial Holdings.

The new debt instrument will carry an interest rate of 3.75%. BlackBerry says that the transaction could be completed in the first week of September, this year.

These debentures can be converted into common shares of BlackBerry at a price of $10 per common share and are due on late November, 2020.

BlackBerry has also announced a plan to redeem $1.25bn of 6% debentures by early September this year. The company says that the debentures will be redeemed at a redemption price of 106.7213% of the outstanding principal amount.

This price includes all of its obligations for principal and interest, with no additional amounts being paid. These debenture-holders also have the option of converting their debt instruments into common shares.

If the option of conversion is availed by the creditors, the total amount of $605m along with the interest rate of 3.75% will represent 11.57% of the total common stock held by the company.

BlackBerry executive chairman and CEO John Chen said: “The restructuring of our convertible debt will enable us to significantly reduce our interest expense and potential future dilution for our shareholders.

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“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.”

The company, which was the first to introduce smartphones, has not been able to compete in competitive smartphone market.

In July this year, the company announced to ditch its Classic model after gradually shifting its focus to software.

In 2015, the company made a smartphone based on Google’s Android platform and in July this year it had announced its second Android phone.

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