Mobilicity receives court approval for sale, restructuring

Dave Wireless Inc. announced a court-approved restructuring process with a sale as an option. The new entrant wireless carrier, operating as Mobilicity, said in a release Friday that it obtained two orders of the commercial list of the Ontario Superior Court authorizing the company to “call and hold meetings at which two arrangements will be voted on by debt holders pursuant to the Canada Business Corporations Act.” Meetings with security, or debt holders are scheduled for May 21, 2013, the release said, and the date to record entitlement to vote at the meetings is April 25. “The relevant stakeholders entitled to vote at the meetings will be asked to approve both a recapitalization plan and a sale plan,” the release said. “These two plans are mutually exclusive, though both plans are being pursued in parallel so that one of the two plans can be implemented on an expedited timeline.” If both plans are approved and the sale plan cannot be completed on proposed terms, the recapitalization plan would go ahead, the company said. Proceeds from a sale of the company would be used to repay Mobilicity's debt holders, it said. “The sale plan provides a structure for an as yet to be determined purchaser to acquire all of the outstanding shares of Mobilicity,” the release said. “The purchase price received would be applied to repay all of the outstanding first and second lien debt of Mobilicity, with the remainder being used to repay outstanding unsecured debt securities issued by Mobilicity.” The company said its recapitalization plan would involve reorganizing the capital of Data & Audio-Visual Enterprises Holdings Inc., with second lien notes repaid and Mobilicity receiving additional liquidity to continue operations and serving subscribers. The Globe and Mail reported this month that Telus Corp. was in talks to purchase Mobilicity for $350 million to $400 million. The newspaper reported private equity firm Catalyst Capital Group Inc., a major bondholder with Mobilicity, had earlier this year backed away from a $75-million financing agreement with the new entrant wireless carrier. In a release Friday, Catalyst said it is concerned about the court approval because it is difficult to see how either of Mobilicity's proposals would provide enough capital for the carrier to grow its business, acquire spectrum, or sustain its mobile services. "In fact, the conditions on the proposals may result in the opposite outcome," the release said, adding that it worries Mobilicity's proposals will not benefit creditors, especially second-lien lenders. "The old and new part of Mobilicity's financing appears to hurt second-lien holders by requiring cancellation of second-lien principal. This is a change from the February financing and reduces its adverse impact upon the first-lien debt. This cancellation is necessary if new funds are to be injected into Mobilicity as debt," Catalyst said. "Catalyst is very concerned that neither the new financing nor the proposed plans will benefit creditors or result in a successful sale of Mobilicity, which, according to Mobilicity's court papers, has apparently been attempted for many months," the release said. Catalyst said it hopes to Mobilicity is restructured "in a way that fully respects its existing stakeholder rights and interests and that leads to a successful and viable major mobile player in Canada." It added: "Catalyst intends to take an active role in the restructuring with a view to achieving that result." Analysts say the new entrants, to compete effectively, will need to purchase hundreds of million of dollars worth of spectrum licences in a 700 MHz band auction coming up in November. Potential consolidation in Canada's wireless sector, particularly between new entrants and incumbents, will present further problems for Industry Minister Christian Paradis and his policy aim of ensuring at least four competing wireless carriers in each region, analysts told The Wire Report this month. Companies participating in Industry Canada's 700 MHz spectrum auction have until June 11 to submit applications and deposits. Mobilicity could not be immediately reached for comment. —With reporting by Simon Doyle at sdoyle@thewirereport.ca and editing by Nicholas Kyonka at nkyonka@thewirereport.ca

Mobilicity receives court approval for sale, restructuring

News | April 26, 2013

Unlock all the Canadian telecom, broadcasting and digital media news you need.

FREE TRIAL

SUBSCRIBE

Inside The Wire Report

Information

Hill Times Publishing

Get in Touch With Us

Mobilicity receives court approval for sale, restructuring

News | April 26, 2013

Unlock all the Canadian telecom, broadcasting and digital media news you need.

FREE TRIAL

SUBSCRIBE

Related Stories

Federal gov’t facing second legal battle over wireless wipeout

Shaw says timing, current market dynamics made Wind deal attractive

CRTC tells Mobilicity to move on 911 texting

Some Mobilicity creditors might lose out: court documents

Reuse & Permissions

Inside The Wire Report

Information

Hill Times Publishing

Get in Touch With Us