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Prem Watsa’s Fairfax Financial Holdings says that after the $1-billion refinancing of BlackBerry. Fairfax holds 17.7 per cent of the company’s common stock.Charla Jones/The Globe and Mail

Prem Watsa's Fairfax Financial Holdings says that it has emerged from the recent $1-billion refinancing of BlackBerry Ltd. with 17.7 per cent of the company's common stock, but a closer look at the fine print tells a more convoluted story.

After abandoning a takeover bid earlier this month, Fairfax led a $1-billion (U.S.) convertible debenture offering, which pays debenture holders 6 per cent a year. They also have the right to convert the instruments into stock at a rate of $1,000 per share, or 100 million shares in total.

Fairfax had 51.9 million shares, or 9.9 per cent of BlackBerry stock, prior to the refinancing, and took a $250-million bite out of the offering, which is convertible into 25 million shares. It also has an option within 30 days after the issuance of the debentures to purchase another $250-million in debentures. Others participating in the offering include Manulife Asset Management, Canso Investment Counsel and Qatar Holding LLC.

According to securities regulations, Fairfax is deemed beneficial owner not only of the debentures it has already purchased, but of those which it could purchase under the option. Its calculation of the 17.7-per-cent stake assumes it takes the option and converts its debentures to stock.

But Fairfax hasn't yet exercised the option, nor does its percentage calculation factor in the possibility that other debenture holders may also exercise their rights. If they all do, and Fairfax doesn't act on its option, it will only be left holding 12.2 per cent of the company's stock.

Whatever the final calculation, two things are certain: Fairfax will be left with by far the largest block of BlackBerry stock (according to conversions rights), and therefore, votes, while co-founders Mike Lazaridis and Doug Fregin, who had hoped to launch a bid of their own for the company, will see their stake in the company diluted down from 8 per cent. It could drop to as little as 6.4 per cent if Fairfax upsizes its debenture stake and all $1.25-billion of the offering converts to stock.