Chris Lau
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Chris Lau in Value Stocks,

​BlackBerry Refinancing 101

Markets fail to understand the importance of BlackBerry’s (BBRY) debenture issue. Since its announcement, the stock slipped from the $8.00 per share level.

Blackberry is effectively cutting debt costs. It redeemed $1.25 billion in convertible debentures that paid 6%. It then issued $605M in new convertible debentures at a new rate of 3.75%.

This reduces BlackBerry’s carrying cost for the debt. The debt restructuring strengthens the company’s balance sheet.

Unlike AMD, which issued debt and shares worth north of $1 billion, BlackBerry’s move adds no dilution to shareholder equity.

AMD's move hurt the stock price.

Key point: debt creates tax savings worth ~$23 million annually from interest payments on the debentures.

Related: read more on AMD Dilution (Part 2)...Not a Worry