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BlackBerry's headquarters in Waterloo, Ont., is seen on June 22, 2016.

The Canadian Press

BlackBerry Ltd. and Fairfax Financial Holdings Ltd. have once again restructured a debt refinancing deal to avoid a shareholder vote after the Toronto Stock Exchange withdrew its approval of the transaction.

BlackBerry said it cut the size of a convertible-debt offering from US$535-million to US$365-million, thus limiting the number of shares that Fairfax, already a major shareholder, would own if it were to swap its bonds for stock.

Dorsey Gardner, a veteran securities analyst from Florida who says he owns about five million BlackBerry shares, went public last week with his complaints about the transaction, saying it would allow Fairfax to own more than 20 per cent of the company, in which case stock exchange rules require a shareholder vote.

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BlackBerry and Fairfax had already tweaked the arrangement to insert a “blocker” provision, which would limit Fairfax to 19.99-per-cent ownership. BlackBerry also released additional disclosure to describe how it weighed a Fairfax deal versus other possibilities that did not involve a related party. Now, by scaling back the offer, the holding company’s ownership would top out at about 16 per cent if the debt were converted to stock.

Furthermore, TSX rules call for a shareholder vote when a transaction entitles an insider to 10 per cent or more of the company’s shares.

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Fairfax founder and CEO Prem Watsa is also a director of BlackBerry owing to Fairfax’s 8.4-per-cent stake in the company.

BlackBerry says that if all US$365-million of the new convertible debentures were converted, it would issue stock equal to 9.86 per cent of the company, based on the new share count. Fairfax is buying US$330-million of them, putting it further below the threshold.

BlackBerry had been relying on Mr. Watsa not being considered an insider and on the refinancing being small enough to not trigger a vote.

BlackBerry had been paying 3.75-per-cent annual interest on an existing class of debt, largely held by Fairfax, but the conversion price was US$10 a share – well above current market prices, making it unlikely that BlackBerry would ever issue new stock to settle the debt.

The new issue was to pay 1.75-per-cent interest, with a conversion price of US$6 a share. While that’s still a premium to where BlackBerry traded when the deal was negotiated, it makes it more likely that the company could issue tens of millions of new shares, which would dilute the ownership of stockholders such as Mr. Gardner.

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Mr. Gardner said Monday that he would have a response to the new BlackBerry-Fairfax plan this week.

BlackBerry said Friday that when it first announced the debt deal in July, it understood that the deal would not fall under certain “insider participation” rules.

However, BlackBerry said the TSX told it Aug. 27 that insider limits would indeed be applied, “reversing the prior conditional approval of the original transaction.” BlackBerry called it “unexpected and disappointing.”

TSX spokeswoman Catherine Kee declined to comment, citing policy against addressing “individual issuer matters.”

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