Mobilicity starts restructuring process

29 Apr 2013

Canadian cellco Mobilicity (the trading name of Data & Audio-Visual Enterprises Holdings) released a statement on 26 April 2013 announcing that it will ask its debt holders to approve a restructuring plan that involves a recapitalisation of the company and a potential sale. Mobilicity obtained two orders of the Ontario Superior Court of Justice (Commercial List) authorising it to hold meetings on 21 May 2013 at which two arrangements will be voted on by security holders pursuant to the Canada Business Corporations Act. The relevant stakeholders entitled to vote at the meetings will be asked to approve both a recapitalisation plan and a sale plan. The two proposals are mutually exclusive, though the statement continued that: ‘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 the terms contemplated, then the recapitalisation plan would be engaged.’

The sale plan provides a structure for an as yet to be determined purchaser to acquire all of the outstanding shares of Mobilicity. 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.

Under the proposed recapitalisation plan, the share capital of Data & Audio-Visual Enterprises Holdings would be reorganised, certain existing second lien notes would be repaid and Mobilicity would receive additional liquidity to enable it to continue as a going concern, continuing to service its existing subscribers and dealers in its coverage areas.

According to TeleGeography’s GlobalComms Database, the company is currently owned by Obelysk (16.1% equity, 62.6% voting share), which is the diversified investment arm of Toronto entrepreneur John Bitove, and Quadrangle Capital Partners of New York (75.9% equity, 22.4% voting share), which is a global investor in the telecoms and media sectors.

One party with a vested interest, Catalyst Capital Group, released a statement on the same day as Mobilicity’s communication, saying that it ‘is encouraged to see that today’s court orders maintain the [debt holding] parties’ substantive rights. However, Catalyst is concerned that it is hard to see how the proposed plans would provide the capital required for Mobilicity to grow its business, acquire spectrum or provide viable, sustainable services to Canadian consumers… 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… Catalyst wishes to see Mobilicity 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. Catalyst intends to take an active role in the restructuring with a view to achieving that result.’

Canada, Mobilicity