[greyw0lf01]

By Sridhar Natarajan, Hugo Miller and Ari Altstedter
Sept. 25 (Bloomberg) -- BlackBerry Ltd.’s patents may hold the key to whether Fairfax Financial Holdings Ltd. can raise enough debt to finance its $4.7 billion bid for the smartphone maker.
The debt-free company’s patents, licenses and a secure network may be valued at about $2.8 billion, according to a report yesterday from Raymond James Financial Inc. The firm may seek borrowings of about $2 billion to fund the buyout, according to Nicholas Leach, a money manager at Canadian Imperial Bank of Commerce’s CIBC Global Asset Management unit.
BlackBerry, whose cash balance dwindled $500 million to
$2.6 billion last quarter, will have a credit profile consistent with a junk-rated company more than three levels below investment grade, according to debt-research firm CreditSights Inc. Investors are likely to purchase debt if it’s backed by the company’s most important assets, its patents, based on the value they could recover in a bankruptcy, according to Marc Gross, a money manager at RS Investments in New York.
“The banks would need to do a first-lien backed by the assets,” Gross, who oversees about $4.5 billion in fixed-income products, said in a telephone interview from New York yesterday.
“If that’s not enough, it has to come with a sweetener for the other portions, because the market is going to be very skeptical.”

Debt Financing

First-lien debt refers to borrowings where creditors have the highest claim on a company’s assets. Prem Watsa’s Fairfax, whose 10 percent stake makes it Waterloo, Ontario-based BlackBerry’s biggest shareholder, won’t be adding more capital, Watsa said in an interview on Sept. 23. The firm is seeking to obtain financing from Bank of America Corp. and BMO Capital Markets, according to a Sept. 23 statement.
Other yet-to-be identified members of the buyout group will be able to finance the rest of the purchase through equity and debt, Watsa said in a telephone interview earlier this week.
Kerrie McHugh, a spokeswoman for Charlotte, North Carolina- based Bank of America and BMO Capital Markets spokesman Pav Jordan declined to comment about any potential financing.
Adam Emery, a spokesman for BlackBerry, also declined to comment.
The company can shop for better offers from other bidders during the diligence period, which is expected to be completed by Nov. 4, according to the Sept. 23 statement.

RBC Bonds

Elsewhere in credit markets, Royal Bank of Canada issued $2 billion of covered bonds due in October 2018 yielding 43 basis points more than the mid-swap rate.
TMX Group Ltd., owner of the Toronto Stock Exchange, sold
C$1 billion of bonds in three parts, including five-year notes priced to yield 3.253 percent and 10-year securities with a yield of 4.461 percent.
The extra yield investors demand to own the debt of investment-grade corporations rather than government was unchanged at 126 basis points yesterday, according to the Bank of America Merrill Lynch Canada Corporate Index. Yields declined to 3.26 percent from 3.3 percent.
The premium investors demand for provincial debt compared to federal benchmarks was also steady at 72 basis points, according to the Bank of America Merrill Lynch Canadian Provincial & Municipal Index. Yields dropped to 3.05 percent from 3.1 percent.
Corporate debt has lost 3.34 percent this year compared with provincial debt’s 5.8 percent loss and a 4.3 percent decline for federal government debt.

Other Buyers

Another serious buyer for BlackBerry is unlikely to emerge, CreditSights analyst Ping Zhao said in a Sept. 23 report.
“The company only has a limited number of essential communication patents,” Zhao wrote. “The value of their patents is lower than might appear at first glance.”
BlackBerry’s assets include patents valued at about $1.6 billion, its network of servers that may fetch $825 million and
$412 million of licenses, Raymond James analyst Steven Li, wrote in a report yesterday.
The company’s patent portfolio includes trademarks on smartphone designs and engineering as well as a share of patents BlackBerry acquired from Nortel Networks Corp.
The company was part of a consortium along with Apple Inc.
and Microsoft Corp. that paid $4.5 billion in 2011 for 6,000 patents and applications for wireless and Internet technologies belonging to Nortel. The purchase took place after the Canadian telephone-equipment maker filed for bankruptcy in 2009 and was broken up and sold off in parts.

Diminishing Share

BlackBerry has been suffering years of market share losses to Apple Inc. and Samsung Electronics Co. which have done a better job of luring consumers with a steady stream of innovative devices. The company’s share of the market it once dominated, tumbled to 2.9 percent in June from 12 percent two years earlier, according to research firm IDC. BlackBerry’s sales have tumbled 44 percent since 2011.
BlackBerry’s new range of phones, while earning good reviews, have struggled to catch on, leading the company to take a writedown for unsold inventory of as much as $960 million in the fiscal second quarter, the company said on Sept. 20. Three days later, the company said it reached an agreement with Fairfax on a plan to take the company private
Sales slumped to $11.1 billion in the year-ending March 2, from $19.9 billion in its fiscal year 2011.
The firm is cutting 4,500 jobs, or about a third of its workforce, and narrowing its focus to corporate customers, it said in a statement last week.

‘Difficult’ Financing

“There’s been nothing but negative news surrounding BlackBerry,” CIBC’s Leach, who helps manage $2.7 billion in high-yield debt, said in a telephone interview. “They don’t have any bond investors at all that are familiar with the company. So for them to come to the high-yield market, it’s going to be very difficult.”
The company could look to do a mix of secured bank debt and high-yield notes, which will have to be mainly in U.S. dollars, Leach said.
Investors are seeking yields of about 5.3 percent to take on the risk of offering loans to single-B rated firms this month, according to Standard &Poor’s Capital IQ Leveraged Commentary and Data. Similarly rated bonds in the U.S. have yielded about 6.8 percent in September, Bank of America Merrill Lynch index data show.

Fed Stimulus

The Federal Reserve’s extraordinary stimulus measures, have given firms an opportunity to tap the credit market at attractive rates to enable them to roll over debt and to finance buyouts.
The average borrowing rate for U.S. corporate bonds of 3.8 percent this year, is at about the lowest ever, and and compares with yields of about 6 percent that investors demanded to hold company bonds in the five years through 2007, Bank of America Merrill Lynch index data show.
BlackBerry should consider adding incentives to its debt offering, such as options for creditors to purchase a stake at a specific price, which bondholders could benefit from if BlackBerry is able to execute a successful turnaround strategy, RS Investments’s Gross said.
“There is no interest rate high enough to get you the returns for the risk you are taking on,” he said. “It’s a hard thing to pitch.”

[Superfly_FR]

This thread is now taken the life of an Octopus. I am so confused I don't even follow what we are talking about. (OK, nothing new there). LoL

Don't be surprised if SF gives us a spanking tomorrow when he wakes up.

Ok guys, there's now a specific thread you can use if you want to talk about other stocks.
http://forums.crackberry.com/bbry-f3...cation-853728/


As I can understand it's a convenient place here to hassle M+8, could you please consider having your posts/questions made there and - eventually - just link it here, with a mention like *OT other stock to : xxxxxxxxxx*".
Of course, replies have to be made there too !!!

Skipping pages about gold and other values can be a hassle, especially with CB10. More, we sometimes don't even understand if comments are related to BBRY or others ... So please stick ON topic, i.e: BBRY.
Thanks a lot !

Cheers,Thank you !
SF

[cjcampbell]

Apologies

Posted via CB10

Nah... no need to apologize. We all do it, just sometimes need a friendly reminder to not hit send without a quick re read lol. I've done it and will no doubt do it again. After a couple of infractions here, I try to be more mindful

[m1a1mg]

Add CNBC to the list that think the Fairfax offer may be a bluff:

The tenuous nature of BlackBerry's deal with Fairfax Financial Holding has signaled to some industry experts that the firm's offer is more like a stalking horse bid than a real deal.

Placing such a bid for BlackBerry makes sense for Fairfax for several reasons.

The equity firm owns about 10 percent of BlackBerry's common shares, so it has a strong incentive to get the best deal possible for any sale. Signing a letter of intent to take BlackBerry private for $9 per share gives other potential buyers a set time period to court the handset maker for at least that price.

"Fairfax is their biggest shareholder, so they have a defensive position that they need to take as well. I would look at this as putting a line in the sand, as telling the market that at $9 there is a buyer going well through due diligence," James Gellert, CEO at Rapid Ratings, said Tuesday.
If Fairfax succeeds in attracting another bidder who is willing to pay more than $9 per share, then it would also get an incentive fee of about 30 cents a share, or about $157 million. In addition, there are no financial penalties if Fairfax chooses to pull its offer off the table during the due diligence period, which ends Nov. 4.

It should also be noted that Fairfax is still working to raise financing for the deal, so there's a chance it might not be able to get the funds necessary to make a deal happen.

So there's not much downside for Fairfax for at least putting a bid out there. As far as other bidders go, there's still a chance, albeit slim, that someone might be willing to buy BlackBerry, said Colin Gillis, an analyst for BGC Partners.

For one, now that BlackBerry finally has an official bidder in place, the pressure is on other potential buyers—if there are any—who might be interested in acquiring the company.

"You never want to say 'never.' There are a lot of large U.S.-based tech companies that have big piles of offshore cash that they could use to finance an acquisition like this," Gillis said Monday on CNBC's "Squawk on the Street."

Gillis also said BlackBerry is still modestly priced at $9 a share.

"This is still a 'take-under' bid. You look at the average one month price for BlackBerry, it's $10.32, so this $9 bid is a take-under," he said.

But the chance of another buyer stepping up is hard to believe, even with shares priced at where they are, said Carolina Milanesi, an analyst for Gartner.

Milanesi said that she thinks a deal with Fairfax will occur because there is no other interested party who would want all of BlackBerry's business, especially its handset business.

It doesn't make sense for someone who is only interested in certain BlackBerry assets to buy the entire company; it makes more sense for potential buyers to wait until BlackBerry figures out what assets it plans to sell as a private company because they will get a better deal, she said.

"Other interested buyers are waiting to see what happens afterwards," she said. "They want to wait and see what happens to the pieces after the company goes private, to see what they will keep and what they will sell. They are better off for waiting," she said.

Why the BlackBerry deal may be a fake out

[Chris2J]

I don't like what I see...

[Superfly_FR]

Add CNBC to the list that think the Fairfax offer is a bluff:

If I rely to the article title, would you mind changing your statement accordingly ?
Add CNBC to the list that think the Fairfax offer is may be a bluff

[Superfly_FR]

About patents valuation. Interesting material. Pro and cons, as usual. Make your own mind.
Value of BlackBerry

[m0de25]

We discussed the ECC issue on the boards back in August. I did some research, since I was considering selling and wanted to know the real worth of ECC. My post, #13, is something I found while searching.

http://forums.crackberry.com/bbry-f3...ks-ecc-837633/

Thanks for that... So like CJ alluded to, it's the implementation of the ECC and not necessarily ownership of the math itself.

[Superfly_FR]

I'm pretty sure there are many interpretations, but I'm confused when I look at this chart.
We have a (relatively) low but growing volume leading to a real dive. Then "support is reached", volume lowers back and SP raises.

Can we get something from this ?

[m1a1mg]

If I rely to the article title, would you mind changing your statement accordingly ?
Add CNBC to the list that think the Fairfax offer is may be a bluff

Always for you Super.

[m1a1mg]

Thanks for that... So like CJ alluded to, it's the implementation of the ECC and not necessarily ownership of the math itself.

The other discussion was whether the US Government would step in based on national security. I have no idea, but it is worth mentioning.

[leafs123]

So the stock is at Friday levels now. Market losing confidence even on the Prem deal?

Posted via CB10

[peter9477]

Actually, from what I read, it's not the actual encryption itself, but the implementation of the encryption. I could be wrong as I basically skimmed a few pages to gather at least a little insight but that's what I walked away with. Back before Certicom was bought by RIM, they had a lawsuit against Sony with how they were using it, not the fact that they were using it. It ended up settling out of court and the suit was dropped.

You've pretty much just defined what a patent is. It's all about an implementation of something, not the thing itself. You can't patent something like the concept of ECC, only an actual implementation of it. Contrary to a fairly widely held belief....

(Correction: you can patent just about anything you want, if you can dazzle the patent examiners, apparently. I should have said you can't get a defensible patent on a mere concept... ;-) )

[fin2007]

So the stock is at Friday levels now. Market losing confidence even on the Prem deal?

Posted via CB10

not necessarily. but weak hand selling.

but it seems there is no other offer.

[cjcampbell]

not necessarily. but weak hand selling.

but it seems there is no other offer.

It's been 2 days with a 6 week grace period ahead.... patience. It's not like this is a pressure sales situation.

[cgk]

Fairfax Financial Holdings Ltd. is seeking over $1-billion (U.S.) of equity investments from institutional investors to back its preliminary $4.7-billion plan to acquire BlackBerry Ltd.

According to people familiar with the discussions, Fairfax’s chief Prem Watsa has personally contacted several leading Canadian and U.S. pension and private equity funds to win support for a highly conditional overture to acquire the troubled smartphone maker. These sources said that as of Tuesday, only one pension fund, the Ontario Teachers’ Pension Plan, is seriously considering joining the potential takeover consortium.

A spokeswoman for Teachers declined to comment.

Mr. Watsa is pitching the potential acquisition as a leveraged buyout that would be financed with more than $3-billion of bank loans, $1-billion of equity from institutions and Fairfax’s nearly 10-per-cent stake in BlackBerry, which is currently valued at about $470-million.

If Fairfax falls short of the equity it’s seeking to help finance the potential takeover, people familiar with its plans said it intends to arrange a short-term bridge loan that could be repaid with BlackBerry’s cash holdings of about $2.6-billion.

Fairfax has been quietly courting BlackBerry for months, but according to sources, the company’s directors had little interest in its highly leveraged plan until Friday when its announcement of a nearly $1-billion writedown erased nearly 20 per cent of the company’s stock market value in the final hour of trading.

Fear of further stock price declines prompted the board to enter discussions late Friday with Fairfax, which after months of talks with a variety of potential buyers, was the only suitor still expressing interest in the company. Sources familiar with the discussions said the two companies negotiated through the weekend and talks almost broke off when Fairfax refused to back away from its demand for the lucrative $150-million break fee it secured.

“This was an agonizing decision for the board,” said one person familiar with the negotiations.

Fairfax seeks $1-billion from investors for BlackBerry deal - The Globe and Mail


So the board see the iceberg and are pushing the women and children (stockholder, employees) to the ground as they race for the lifeboats.

[plasmid_boy]

You've pretty much just defined what a patent is. It's all about an implementation of something, not the thing itself. You can't patent something like the concept of ECC, only an actual implementation of it. Contrary to a fairly widely held belief....

(Correction: you can patent just about anything you want, if you can dazzle the patent examiners, apparently. I should have said you can't get a defensible patent on a mere concept... ;-) )

My experience with patenting things is that it is a pain in the **** and it is expensive (average about $50K to $100K).

If I was to be interested in buying BlackBerry, I would sit on my hands and wait for the company to sink deeper or even watch it die. I would then come in to sweep it up for cheap. A potential positive effect of Prem's offer is that it forces anyone interested to step up now. Otherwise, if no one else jumps in, Prem would end up with the best deal of its kind in history. I would be shocked if this happens (but it could of course).

[spiller]

Patents and services/software potential - the hardware is dead and BB10 with it.

Having said that I was talking before to someone and they claimed (and I haven't checked yet) that the patents are already cross-licensed to MSFT which reduces the chances of them making a bid in order to get the patents.

BB10.x OS is not dead yet. If Samsung buys BB then they get a leading OS for FREE which they can monetize, and market properly, and with deep pockets to entice developers - who can either write native apps or repackage for the 4.2 runtime. I'm sure BB10.x is way ahead of Tizen. Samsung could also potentially tie in BB10 downlaods to the Samsung app store. BB10.x is a better OS 'ecosystem' than iOS IF they get apps on board.

[Superfly_FR]

Always for you Super.

Thank you m1a1mg
Seems that the bid is more clear now ...

Edit: cgk is faster ... lol

[Superfly_FR]

The other discussion was whether the US Government would step in based on national security. I have no idea, but it is worth mentioning.

Strangely, NSA pushes for ECC adoption ... go figure

[spiller]

Who's to say Fairfax doesn't license and/or sells the BlackBerry parents to someone else once it has the company? I think that if this Fairfax deal does occur, they work with trimming the company even further, split the parts and get a ROI.

Posted via CB10

BINGO. They won't lose. Sum of parts is more than analysts are adding it up to. Everyone leaves the 1B in property and other illiquid assets out of the sum. No one is adding $ for BBM-x which could be between 1B and 5B ....release it and watch is grow to 200M in a few months and see what valudation they give it. Shutting down hardware and paying severance will be about half the cash on the balance sheet (1.3 of 2.6B). $9 looks like a bargain and I'm sure someone will pay it....

[Superfly_FR]

On other news ... I've just fired an order for 450 shares anything under CAN$ 8.20 today.
Would average around 10.5 USD.
Now closing my browser .
Late work to do, see you later.

[cgk]

BINGO. They won't lose. Sum of parts is more than analysts are adding it up to. Everyone leaves the 1B in property and other illiquid assets out of the sum. No one is adding $ for BBM-x which could be between 1B and 5B ....release it and watch is grow to 200M in a few months and see what valudation they give it. Shutting down hardware and paying severance will be about half the cash on the balance sheet (1.3 of 2.6B). $9 looks like a bargain and I'm sure someone will pay it....

Which is effectively what palm did when it was failing, it sold off all of its patents but retained a license to use them.

[kellyweng88]

man....purchasing blackberry stocks may have been one of the worst decisions I've ever made

[Reed Richards]

CJ raises an interesting point about this not being a pressure sales situation. I've been wondering about Friday's earnings call, and what we will hear about forward guidance.

If the next quarter projects as negative, even with the tremendous cost-cutting, I would think that the stock will tank worse... the market would probably think that more negative quarters would lead Watsa to lower his bid, or rescind it altogether. I'd also doubt that there would be other bids for the company as a whole. If forward guidance is actually decently positive, it could take the pressure off of BlackBerry to do any sort of deal. I think the odds of that are slim, but they are not zero.

I also want to hear about when xBBM will be released, and plans for expanding it. Would be a nice asset to tout in other potential deals.