Fairfax leads BlackBerry debt financing

A proposed buyout of mobile handset manufacturer BlackBerry has collapsed, with the Canadian company instead opting for a debt financing package.

Fairfax Financial Holdings, which had been one of the firms mulling a buyout of BlackBerry, will now instead lead a group of investors backing a $1 billion private placement of convertible debentures issued by the company, BlackBerry confirmed in a statement.

Fairfax has agreed to acquire $250 million of the debentures, with the deal likely to complete within two weeks.

The debt comprises $1 billion of unsecured, subordinated debentures at 6 percent interest and with a seven year term, convertible into common BlackBerry stock at $10 per share, a 28.7 percent premium to the company’s closing price on 1 November. If all the debentures are converted, the investor group would end up holding 16 percent of BlackBerry’s stock, the company said.

The investor group also has the option to acquire a further $250 million in debentures as part of the deal, within 30 days of it closing.

As well as the financing deal, there have been a number of senior employee changes at the ailing mobile company. John Chen will be appointed as executive chair of its board of directors, while Prem Watsa, current chairman and chief executive of Fairfax, will be appointed as lead director and chair of the compensation, nomination and governance committee at BlackBerry.

Thorsten Heins and David Kerr intend to resign from the board, while Heins will also be stepping down as chief executive. Chen will replace him in that role until a long-term replacement is found.