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Sep 25, 2019

Fairfax’s Watsa lost $160M in a day on BlackBerry, Stelco

McCreath: Fairfax's losses from Stelco, BlackBerry not 'game-changing' in grand scheme

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Tuesday was a day to forget for Prem Watsa, often referred to as Canada’s Warren Buffett. His Fairfax Financial Holdings Ltd. lost more than $160 million just in his top five listed Canadian investments, according to the latest filings compiled by Bloomberg.

BlackBerry’s abysmal fiscal second-quarter earnings, which saw one of its staunchest bulls join the bear camp, was the prime offender. The stock fell 23 per cent on Tuesday and extended declines Wednesday to the lowest in six years.

To add to the pressure, Fairfax owns BlackBerry convertible debentures. The risk of default over the next year on the $800 million of BlackBerry debt rose to 0.1 per cent on Tuesday from a previous estimate of 0.021 per cent, according to the Bloomberg Default Risk Model.

The second biggest culprit was Stelco Holdings Inc., which slumped 12 per cent on Tuesday after it terminated a US$300 million high-yield bond sale, citing poor steel-market conditions. The stock was down another 1.7 per cent Wednesday.

Including today’s sell-off, Fairfax would have lost about $196 million on its top five Canadian investments from the end of trade on Monday.

“Since we started in 1985, we always take a long-term view and we believe these recent price moves are short-term fluctuations on only a few of our stock holdings,” Paul Rivett, Fairfax president, said by email. “It is also worth mentioning that half of our Blackberry position is in a convertible debenture.”

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