BlackBerry Provides Additional Details Regarding Proposed Debt Refinancing

subject to a separate “standstill” provision to the effect that it and its affiliates will not: (i) acquire or offer to acquire by any means whatsoever beneficial ownership of any Common Shares, (ii) without limiting clause (i) above, acquire or offer to acquire by any means whatsoever beneficial ownership of any securities of the Company if, following any such acquisition, Fairfax would, directly or indirectly, together with their joint actors, beneficially own more than 19.99% of the outstanding Common Shares (assuming, for this purpose, the conversion into, or exchange or exercise for, Common Shares of all securities beneficially owned by Fairfax and their joint actors that are convertible into, or exchangeable or exercisable for, Common Shares), (iii) propose or seek to effect any merger, business combination, tender offer, exchange offer, take-over bid, statutory arrangement, material asset purchase transaction or other change of control, business combination or business disposition transaction involving the Company, its shareholders (in their capacity as shareholders of the Company) or its securities, (iv) effect, conduct or participate in any solicitation of proxies with respect to any securities of the Company (other than any solicitation of proxies conducted by management of the Company), it being recognized that Fairfax shall, however, be entitled to vote their Common Shares in their sole discretion, (v) otherwise attempt to control the management or Board of the Company, (vi) make any public announcement or disclosure regarding an intention to do any action restricted by any of the foregoing, or (vii) advise, assist, encourage or act as a financing source for or otherwise join with or invest in any other person in connection with any action restricted by any of the foregoing, in each case without the prior written consent of the Company. These restrictions will cease to apply after six months or following the announcement or disclosure of a Company-supported take-over bid or a third party agreement with the Company to acquire a majority of the Company’s assets or voting securities.

The Company believes that the terms of the proposed transaction align with the Company’s objectives of reducing its overall indebtedness, significantly reducing its interest expense and managing potential future dilution in a manner that does not introduce Fairfax as a control person, while also avoiding unfavorable stock price impacts and trading activity that might be expected to result from a widely-marketed offering of convertible debentures.

Structurally, the refinancing will be completed in a manner analogous to the process followed when the Company issued the 3.75% Debentures in 2016. The Company will cause the early redemption of all of the outstanding the 3.75% Debentures on September 1, 2020 for 101.6854508% of the principal amount, which is equal to the face value of the 3.75% Debentures plus the ordinary interest payment due on September 1, 2020 and the final interest payment that would otherwise be due on the scheduled November 13, 2020 maturity date. No early redemption premium or other incremental amounts will be payable to Fairfax or the other holders of the 3.75% Debentures; the only change to their pre-existing economic interests is that they will effectively receive their final interest payment on September 1 instead of on November 13.

Fairfax will effectively exchange the US$500,000,000 principal amount repaid to it in respect of the 3.75% Debentures beneficially owned or controlled by Fairfax and its affiliates for an equivalent principal amount of 1.75% Debentures. Another institutional holder that is not related to the Company or Fairfax will also effectively exchange approximately US$35,000,000 principal amount of 3.75% Debentures for 1.75% Debentures.

Related Party Considerations

The Company understands that, as of July 21, 2020, Fairfax and certain of its wholly-owned or controlled subsidiaries, including Hamblin Watsa Investment Counsel Ltd. (collectively, the “Fairfax Group”), beneficially owned or exercised control or direction over approximately 46,724,700 Common Shares representing approximately 8.4% of the issued and outstanding common shares of the Company (the “Common Shares”) on a non-diluted basis, or 96,724,700 Common Shares representing approximately 16.0% of the issued and outstanding Common Shares assuming conversion of all 3.75% Debentures that the Fairfax Group beneficially owns, controls or directs. After giving effect to the proposed transaction, the Fairfax Group will beneficially own, or exercise control or direction over the same number of Common Shares on a non-diluted basis, or 130,058,033 Common Shares, or 20.3% of 638,852,187 Common Shares issued and outstanding on a partially diluted basis. However, as discussed above, the 1.75% Debentures will include “blocker” language to preclude the exercise of the conversion right to the extent that it would result in a holder and its joint actors beneficially owning, or exercising control or direction over, more than 19.99% of the outstanding Common Shares after giving effect to the conversion. In light of the foregoing, the Company does not believe that Fairfax’s participation in the refinancing will materially affect the control of the Company, including as that term is applied for the purposes of the TSX Company Manual.

Based on its current ownership level, although the Fairfax Group is not an insider of the Company for purposes of the TSX Company Manual, as its undiluted ownership is below 10%, it is a “related party” based on its partially diluted ownership for purposes of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions of the Canadian Securities Administrators (“MI 61-101”). The Company considered the application of MI 61-101 to the proposed transaction and determined that the exemptions from the valuation and minority approval requirements in sections 5.5(a) and 5.7(a) of MI 61-101 would be available (the “25% exemption”). The 20-day average closing price of the Common Shares on the TSX on June 30, 2020 was C$6.99, or US$5.13 based on the June 30 daily Bank of Canada exchange rate, and the Company had approximately 555,836,378 Common Shares issued and outstanding on that date. Accordingly, the Company’s market capitalization was approximately US$2.85 billion at that date, and 25% of this amount is approximately US$712 million.

When the Company redeems the 3.75% Debentures in the proposed transaction, Fairfax will receive US$500,000,000 in repayment of the principal amount of the 3.75% Debentures that it holds and then will return that amount to the Company in consideration for 1.75% Debentures. The economic value and subject matter of this exchange transaction is US$500,000,000, plus the value of the interest that Fairfax would otherwise be paid to maturity as described above. The interest entitlement will be the same for Fairfax and all other holders of the 3.75% Debentures and no other consideration or benefit is payable to or to be received by the Fairfax Group and its affiliates in connection with the transaction. In the case of Fairfax, the aggregate interest amount is US$8,427,254.10.

Having regard to the limited time remaining to maturity of the 3.75% Debentures, the trading price of the 3.75% Debentures (only trading at a 1% premium to par, with limited liquidity) and the fact that no incremental value or consideration will be received by the holders of the 3.75% Debentures relative to their existing entitlements, the Company does not believe that the early redemption provides any material value or benefit to the debentureholders. Accordingly, the Company does not believe that the subject matter or economic effect of the accelerated maturity of the 3.75% Debentures is a material factor that would compromise the availability of the 25% exemption.

The Company is relying on an exception in Section 312.03T of the New York Stock Exchange Listed Company Manual from the New York Stock Exchange shareholder approval requirements for the issuance of the 1.75% Debentures to Fairfax. In addition to the Board approval noted above, the Audit and Risk Management Committee of the Board, which is comprised solely of independent, disinterested directors, has approved reliance on this exception and determined that the transaction is in the best interest of the Company and its shareholders.

About BlackBerry
BlackBerry (NYSE: BB; TSX: BB) provides intelligent security software and services to enterprises and governments around the world. The company secures more than 500M endpoints including over 175M cars on the road today. Based in Waterloo, Ontario, the company leverages AI and machine learning to deliver innovative solutions in the areas of cybersecurity, safety and data privacy solutions, and is a leader in the areas of endpoint security management, encryption, and embedded systems. BlackBerry’s vision is clear – to secure a connected future you can trust.

BlackBerry. Intelligent Security. Everywhere.

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Investor Contact:
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SOURCE BlackBerry Limited

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