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BlackBerry Announces Redemption of Existing Convertible Debentures and Provides Update on Issuance of New Convertible Debentures

WATERLOO, Canada, Aug. 28, 2020 /CNW/ — BlackBerry Limited (NYSE: BB; TSX: BB) today announced the amendment of the indenture governing its outstanding 3.75% unsecured convertible debentures (TSX: BB.DB.V) (the “3.75% Debentures”) to permit the optional redemption of the 3.75% Debentures prior to November 13, 2020.  Additionally, a notice of redemption has been issued to holders of the 3.75% Debentures pursuant to which BlackBerry will redeem the entire outstanding principal amount of the 3.75% Debentures on September 1, 2020 (the “Redemption Date”).  The outstanding principal amount of the 3.75% Debentures is US$605 million.

BlackBerry Logo Black (PRNewsfoto/Blackberry Limited)

The 3.75% Debentures will be redeemed on the Redemption Date at a redemption price of 101.6854508% of the outstanding principal amount of the 3.75% Debentures.  The redemption price includes all of BlackBerry’s obligations in respect of principal and interest, and no additional amounts will be payable under the 3.75% Debentures.  Given that the redemption of the 3.75% Debentures approximately two months prior to their scheduled maturity will not impact the economic returns to holders, the company does not consider the indenture amendment providing for the redemption to represent a material amendment to the 3.75% Debentures. 

US$330 million of 1.75% Debentures, reducing the aggregate subscription price in the private placement from US$535 million, as previously announced on July 22, 2020, to US$365 million.  The proposed maturity date, conversion price and other terms of the 1.75% Debentures, including the “blocker” provision agreed in the original negotiations, remain as previously described the company’s press releases on July 22 and August 21, 2020.  The previously disclosed “standstill” provision agreed with Fairfax also remains applicable.  Based on the number of common shares of the company (“Common Shares”) currently outstanding, if all US$365 million of the 1.75% Debentures were converted, the Common Shares issued upon conversion would represent approximately 9.86% of the Common Shares outstanding after giving effect to the conversion.

US$330 million of 1.75% Debentures, the Fairfax Group will beneficially own, or exercise control or direction over the same number of Common Shares on a non-diluted basis, or 101,724,700 Common Shares, or 16.6% of 611,351,418 Common Shares issued and outstanding on a partially diluted basis.

July 22, the company understood that the Toronto Stock Exchange (the “TSX”) did not consider the transaction to be subject to the “insider participation limit” under TSX rules, as Fairfax is not an insider of the company; therefore, the transaction would be exempt from shareholder approval requirements under TSX rules.  However, on August 27, 2020, the TSX advised BlackBerry that this limit would be applied in view of the relationship between Mr. V. Prem Watsa, a director of the Company, and Fairfax, reversing the prior conditional approval of the original transaction by the TSX.

As a result of the unexpected and disappointing reversal of the conditional approval, and given the company’s current liquidity position, BlackBerry and Fairfax agreed to reduce the participation of Fairfax in the private placement and, as so revised, the transaction is exempt from shareholder approval requirements under TSX rules.  The Common Shares issuable to Fairfax on conversion of its 1.75% Debentures from the revised transaction would represent less than 10% of the company’s current issued and outstanding Common Shares.  The revised transaction is also exempt from shareholder approval requirements under the rules of the New York Stock Exchange.

US$330 million of 1.75% Debentures, the revised transaction is a “related party transaction” that will be exempt from the minority approval and valuation requirements of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions of the Canadian Securities Administrators, under sections 5.5(a) and 5.7(a) thereof, as the fair market value of Fairfax’s participation in the transaction is less than 25% of BlackBerry’s market capitalization as at June 30, 2020.  The 20-day average closing price of the Common Shares on the TSX on June 30, 2020 was C$6.99, or US$5.13 based on the June 30 daily Bank of Canada exchange rate, and the Company had approximately 555,836,378 Common Shares issued and outstanding on that date.  Accordingly, the Company’s market capitalization was approximately US$2.85 billion at that date, and 25% of this amount is approximately US$712 million.

July 2020 followed a series of board meetings, with the benefit of independent financial and legal advice.  At that time, the company’s board determined that the proposed transaction was in the best interests of the company and its shareholders, and that it offered financing certainty in unsettled market conditions, with financial terms that would be consistent with, or superior from the perspective of the company to, the terms expected to be available in a marketed offering to refinance the 3.75% Debentures.  This determination was affirmed by the members of the independent audit and risk management committee of the company’s board.  The independent members of the Company’s board and the audit and risk management committee have given further consideration to those matters, including market commentary, as part of their consideration of the revised transaction terms and have confirmed their earlier conclusions, unanimously approving these terms. 

Prem Watsa recused himself from discussions relating to the original and revised transactions at the BlackBerry board and did not vote on their approval.

500M endpoints and over 175M cars on the road today.  Based in Waterloo, Ontario, the company leverages AI and machine learning to deliver innovative solutions in the areas of cybersecurity, safety and data privacy solutions, and is a leader in the areas of endpoint security management, encryption, and embedded systems.  BlackBerry’s vision is clear – to secure a connected future you can trust.

For more information, visit BlackBerry.com and follow @BlackBerry. 

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SOURCE BlackBerry Limited

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