Market Overview

JPMorgan Positive On Blackberry's Debt Reduction Moves


BlackBerry Ltd (NASDAQ: 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: Fairfax Financial Holdings JPMorgan Rod HallAnalyst Color News Financing Analyst Ratings


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