BlackBerry (BBRY): Debt Redemption Has Slight Positive EPS Impact - Wells Fargo
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Wells Fargo analyst, Maynard Um, maintained his Market Perform rating on shares of BlackBerry (NASDAQ: BBRY) after the company announced that it plans to redeem its entire 6% convertible debt of $1.245B by September 2. BBRY is to redeem the debt at 106.7213%. BBRY announced that it will issue $605MM of unsecured convertible debt at 3.75% due November 13, 2020 by September 2, 2016. The 3.75% debt is identical to the 6% debt except the 3.75% debt is not redeemable prior to its maturity. The new debt can be convertible at $10/share and upon conversion would be 11.57% of common shares.
Relative to the analyst's expectations, BBRY will be redeeming its debt roughly two months earlier (than its call date of November 13, 2016) albeit at a 2.7% higher premium (the analyst had expected a 4% premium). The net result to F17 EPS is an increase of 2c [Street: ($0.17)] as the higher premium and new debt is offset by the earlier redemption.
No change to the valuation range of price target of $7.25 - $8.00.
Shares of BlackBerry closed at $7.92 yesterday.
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