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BlackBerry to Sell $605 Million of Convertible Debt to Fairfax, Others

BlackBerry Ltd. Unveils The Square-Screened Passport SmartphoneBlackBerry Ltd. Unveils The Square-Screened Passport Smartphone
John Chen, chief executive officer of BlackBerry.Photograph by Hannah Yoon — Bloomberg/Getty Images

Troubled smartphone maker BlackBerry said it would raise about $605 million by selling convertible debentures to shareholder Fairfax Financial Holdings and other investors.

The Canadian company will also redeem on Sept. 2 roughly $1.25 billion worth of outstanding debentures carrying a coupon of 6%, it said on Friday.

The new debt that BlackBerry (BBRY) plans to issue will have a coupon of 3.75% and will be due in November 2020.

If all of the new debt is converted into stock, it will represent about 11.57% of BlackBerry’s outstanding shares, the company said.

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FairFax (FRFHF), led by well-known contrarian investor Prem Watsa, is BlackBerry’s second largest shareholder with a stake of about 8.9%, according to Reuters data.

Once a dominant force in smartphones, BlackBerry now holds just a sliver of the global market.

BlackBerry said last month it would stop making its Classic model, raising further doubts about the future of the company’s money-losing handset business as it shifts focus to software.

In July, the company unveiled a second Android-based handset, which combines Alphabet’s (GOOG) popular software and broad app catalog with its security and productivity features at a lower price.

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BlackBerry Chief Executive John Chen has expressed confidence that the company’s trimmed-down handset business can meet its September target to turn profitable.

Analysts, however, have urged the company to sell or shut down the unit.

BlackBerry’s U.S.-listed shares were little changed at $7.96 in afternoon trading.