BlackBerry Ltd.  BB.T -16.56%     's effort to find a buyer has failed, leaving the company to attempt a hastily arranged restructuring that raises even more questions for the beleaguered smartphone maker.

Struggling smartphone maker BlackBerry abandoned a plan to sell itself and instead will sell $1 billion of convertible debt to its major shareholder and other investors, and said it would replace CEO Thorsten Heins. Dana Mattioli reports on MoneyBeat.

The Canadian company said Monday it abandoned a tentative $4.7 billion plan to go private and instead will continue as a public company with new leadership and a $1 billion investment from a group led by major shareholder  Fairfax Financial Holdings Ltd.  FFH.T -2.48%    

Executives said the financing was a way to strengthen BlackBerry as it embarks on a new strategy. "One of the things that was hurting this company is that there was a 'for sale' sign up," said Prem Watsa, the chairman of Fairfax, which owns 10% of BlackBerry and sought to take it private. "The for-sale sign is taken down. We have financing in place for the long term."

But the move does little to mollify the company's precarious condition in the eyes of both investors and customers. The stock fell 16.4% to a 12-month low of $6.49, well below the buyout price of $9 a share proposed by Fairfax in September.

Mr. Watsa and BlackBerry executives refrained from laying out a detailed vision of how BlackBerry will stay afloat after a new line of phones flopped and its once-comfortable cash pile quickly disappears.

In recent months, the company has slashed jobs and written down its inventory of unsold phones, and some analysts said the company will need to make more cuts to stay afloat during a transition period.

The company will now be headed in the interim by John Chen, former chief executive of enterprise software company Sybase Inc. He replaces Thorsten Heins, who took over the company nearly two years ago and pushed ahead with a new line of phones instead of forging partnerships or selling any assets.

Mr. Heins didn't respond to a request for comment.

Mr. Chen, who also takes over as executive chairman, will immediately face a raft of questions, chief among them whether he can hold BlackBerry together or will need to sell off chunks of the company.

Mr. Chen said in an interview that there are no current plans to shutter the company's handset business, and that he foresees BlackBerry's turnaround taking at least six quarters. He said he sees BlackBerry becoming the leader in business-focused services, hinting at his experience running Sybase, but he declined to elaborate further. Sybase was able to build a profitable enterprise software business without a smartphone unit.

Even with the $1 billion cash infusion, BlackBerry is still facing a bleak outlook. Excluding the new funds, BlackBerry would, at its current rate of cash burn, run out of cash by the end of next year.

Fairfax said it would buy $250 million of the convertible debt, with the rest coming from undisclosed investors. BlackBerry said the investment is expected to be completed within the next two weeks.

The investment comes after the sale process, about three months long, ended in a bust. People familiar with it said that corporate buyers such as technology companies with the firepower to buy BlackBerry weren't ultimately interested, while deals by financial buyers, which would have involved burdening the struggling company with debt, either didn't make sense or didn't come together quickly enough.

At the time of its preliminary deal with BlackBerry, Fairfax was seeking funding from Bank of America Merrill Lynch and BMO Capital Markets. On the eve of Monday's bid deadline, funding for a full Fairfax takeover of the company was still not in place, according to people familiar with the matter.

It is unclear why exactly Fairfax didn't ultimately secure the funds to seal the deal. Some people familiar with the matter said there was reluctance among other banks that would have been needed to help finance the effort, given BlackBerry's rapidly deteriorating condition.

In an interview Monday, Mr. Watsa said that after studying BlackBerry's books, Fairfax didn't think it was appropriate to burden BlackBerry with the amount of debt a full takeover would require.

"Over the history of Fairfax, we've never had a problem lining up financing," he said, adding that if the firm had wanted to raise funding for a full leveraged buyout of BlackBerry, it could have.

The issues that complicated Fairfax's willingness or ability to raise the funds necessary for the deal were also a factor in the ability of another potential buyout group to seal a deal of its own, one of the people said. That group included Cerberus Capital Management LP,  Qualcomm Inc.  QCOM -0.47%     and two BlackBerry co-founders.

The consortium was frustrated that it wasn't able to do a more thorough examination of BlackBerry's books, according to people familiar with the matter.

Cerberus asked for an amount of information that was unrealistic to provide in the time available, another person said, adding that all bidders had access to the so-called data room full of BlackBerry corporate information.

Adding to the uphill battle that group faced: It was coming together just within the last few days.

The group ended up sending BlackBerry a letter, noting the partnership it had formed and that it had potential financial backing from  Goldman Sachs Group Inc.,  GS +0.68%     according to people familiar with the matter.

The letter didn't include a price and asked for another month to formulate an offer. With its customers clamoring for a resolution to the process¡ªnot to mention investors¡ªBlackBerry and its advisers felt like they didn't have another month to wait.

There were a number of possible industry buyers of BlackBerry that the company's advisers tried to coax offers from. They include  Google Inc.,  GOOG -0.09%      Microsoft Corp.  MSFT +1.17%     ,  Amazon.com Inc.  AMZN -0.07%     and Ericsson, a person familiar with the matter said.

A number of these so-called strategic bidders were drawn to aspects of BlackBerry, including its portfolio of intellectual property, this person said. But ultimately, they didn't bite.

By: DocMemory
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