JPMorgan Positive On Blackberry's Debt Reduction Moves

BlackBerry Ltd BBRY's announcement on Friday that it plans on partially paying off and partially refinancing its current convertible debt to reduce interest expenses is a smart move, at least according to Rod Hall of JPMorgan.

As part of the debt reduction plan, BlackBerry will issue a notice of redemption to holders of its 6 percent convertible debentures at a redemption price of 106.7213 percent of the outstanding principle amount. In addition, the company entered into a new agreement with Fairfax Financial Holdings and other institutional investors to issue 3.75 percent unsecured convertible debentures for $605 million which will be convertible into common shares at $10.00 per share and be due on November 13, 2020.

Hall estimated that BlackBerry will save close to $50 million in interest expenses annually from the transactions. As such, the analyst increased his fiscal 2017 earnings per share estimate by $0.05 to $(0.14) and his fiscal 2017 estimate was boosted by $0.09 to $(0.36) per share.

"We see this as a good transaction for BlackBerry as the one-time additional payment effectively allows for the significant reduction of annual interest expenses," Hall wrote.

Shares remain Neutral rated with a price target raised to $8 from a previous $7.

Posted In: Analyst ColorNewsFinancingAnalyst RatingsFairfax Financial HoldingsJPMorganRod Hall
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