Financially struggling Canadian cellco Mobilicity announced in a press release yesterday that it has been granted protection under the Companies’ Creditors Arrangement Act (CCAA) by the Ontario Superior Court of Justice, which it says will allow it ‘the necessary time and financing to advance and complete a going-concern transaction,’ which is currently being reviewed by federal telecoms authority Industry Canada. Mobilicity added that it ‘believes that the proposed transaction is in the best interests of its stakeholders and hopes to advance the transaction in the near term.’ Pursuant to the court decision, Ernst & Young has been appointed as Monitor by the court to assist the company and its stakeholders; the court also approved Mobilicity’s debtor-in-possession (DIP) financing from some of its existing noteholders, to a maximum amount of CAD30 million (USD29.1 million). Mobilicity says it continues to operate services normally and will provide updates on its progress as matters advance.
Sources cited by the Globe & Mail claimed that the unidentified transaction is a rekindled attempt to get approval for a buyout of Mobilicity by national carrier Telus, after the government effectively blocked the proposed takeover in June by enforcing tighter rules on wireless spectrum transfers.
Mobilicity will not directly bid in Canada’s 4G licence auction scheduled for January, although its chairman and majority voting share owner John Bitove has applied to enter the auction, as has its biggest creditor Catalyst Capital Group, which owns roughly 30% of Mobilicity’s senior secured debt. Reuters reports that Catalyst is not among the group of Mobilicity noteholders providing the additional DIP funding, which should keep Mobilicity operating into spring 2014. The court order provides an initial stay on all claims against Mobilicity (legally registered as Data & Audio-Visual Enterprises Holdings Inc) for 30 days and requires suppliers to continue dealing with the company.