BlackBerry has paid off $365 million worth of debentures but still holds $150 million worth of convertible notes.
BlackBerry has entered into an agreement with certain controlled affiliates of Fairfax Financial Holdings Limited (together, “Fairfax”), pursuant to which Fairfax will subscribe for US$150 million aggregate principal amount of 1.75% extendable convertible unsecured debentures of BlackBerry (the “Extension Debentures”) on a private placement basis (the “Transaction”).
The Transaction is expected to be completed on or before November 17, 2023.
BlackBerry has paid all amounts due upon the maturity of its outstanding 1.75% unsecured convertible debentures issued September 1, 2020 the “2020 Debentures”).
The outstanding principal amount of the 2020 Debentures was US$365 million and none of the 2020 Debentures had been converted into common shares of BlackBerry (“Common Shares”) prior to repayment.
The Extension Debentures will be convertible into Common Shares at a price of US$6.00 per Common Share and will be due on or about February 14, 2024, with an option for the parties to extend the maturity date to on or about May 14, 2024, by mutual agreement.
The conversion price represents a premium of approximately 64.8% to the closing price of the Common Shares on the New York Stock Exchange on November 10, 2023, and the Common Shares issuable upon conversion of all of the Extension Debentures would represent approximately 4.3% of the current issued and outstanding Common Shares.
Aside from the maturity date, the terms of the Extension Debentures will be substantially identical to those of the 2020 Debentures, except that the Extension Debentures will not be listed on any stock exchange and will not involve an indenture trustee.
The Extension Debentures will be guaranteed on a senior unsecured basis by BlackBerry Corporation and BlackBerry UK Limited (the “Subsidiary Guarantees”).
In light of Fairfax’s interest in the proposed subscription for the Extension Debentures, the Transaction is a “related party transaction”, but 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.
The Transaction will also be exempt from shareholder approval requirements under the rules of the Toronto Stock Exchange and the New York Stock Exchange. Fairfax beneficially owns, or exercises control or direction over, 46,724,700 Common Shares, representing approximately 8.0% of the currently issued and outstanding Common Shares on a non-diluted basis.
Fairfax would own, control, or direct 71,724,700 Common Shares representing approximately 11.8% of the issued and outstanding Common Shares assuming full conversion of the Extension Debentures.
Mr. Prem Watsa recused himself from BlackBerry Board of Directors discussions relating to the Transaction and did not vote on its approval.
The closing of the Transaction is subject to customary conditions, including approval from the Toronto Stock Exchange and the New York Stock Exchange.
The offer and sale of the Extension Debentures, the Subsidiary Guarantees and the Common Shares issuable upon conversion of the Extension Debentures, if any, will be made to accredited investors in reliance on the exemption from registration under Section 4(a)(2) of the U.S. Securities Act of 1933, as amended (the “Securities Act”), and will not be registered pursuant to the Securities Act or any state securities laws.
Unless a subsequent sale is registered under the Securities Act, the Extension Debentures, the Subsidiary Guarantees and the Common Shares issuable upon conversion of the Extension Debentures, if any, may only be offered or sold in the United States in a transaction that is exempt from, or in a transaction not subject to, the registration requirements of the Securities Act and other applicable securities laws.
An early warning report will be filed by Fairfax in accordance with applicable securities laws and will be available under BlackBerry’s profile on SEDAR+ at www.sedarplus.ca or directly from Fairfax by contacting John Varnell, Vice President, Corporate Development, at (416) 367-4941.
BlackBerry’s head and registered office address is 2200 University Avenue East Waterloo, Ontario N2K 0A7. Fairfax’s head and registered office address is 95 Wellington Street West, Suite 800, Toronto, Ontario M5J 2N7.
Fairfax will acquire the Extension Debentures for investment purposes, and in the future, it may discuss with management and/or the Board of Directors of BlackBerry any of the transactions listed in clauses (a) to (k) of item 5 of Form F1 of National Instrument 62-103 – The Early Warning System and Related Take-over Bid and Insider Reporting Issues and it may further purchase, hold, vote, trade, dispose or otherwise deal in the securities of BlackBerry, in such manner as it deems advisable to benefit from changes in market prices of BlackBerry securities, publicly disclosed changes in the operations of BlackBerry, its business strategy or prospects or from a material transaction of BlackBerry.