A judge has extended Mobilicity's grace period from its creditors for an eighth time but rejected a request from its biggest bondholder for a court-ordered meeting with the company.
Catalyst Capital Group. Inc. said it has proposed various options to help resolve the wireless startup's financial situation and asked the restructuring court to order a meeting with the company and its other creditors.
But Justice Frank Newbould of the Ontario Court of Justice declined to make such an order Thursday, noting that Ernst & Young Inc., the court-appointed monitor of the company's creditor protection process, said it is in the midst of trying to facilitate further discussions between Mobilicity and each of its major stakeholders.
"Discussion amongst the stakeholders is obviously important," Justice Newbould wrote in a brief decision, adding, "But I am in no position to require the [company] or Mr. [William] Aziz [its chief restructuring officer] to negotiate with any particular party."
Catalyst, a Toronto-based private equity firm led by Newton Glassman, said in a lengthy court filing Wednesday it is concerned that without a plan in place soon, Mobilicity could find itself without the financial backing to take part in next year's public auction for cellular spectrum in the AWS-3 frequencies. Without the spectrum, Catalyst argued, the company's value could diminish even further.
"I have no doubt that the [company] and Mr. Aziz are well aware of the urgency of the situation and a direction to the monitor to organize a meeting will not affect that," Justice Newbould wrote.
He also noted that Catalyst has been in touch with representatives for other Mobilicity stakeholders over the past few days.
Catalyst, which holds about 30 per cent of Mobilicity's senior debt, has been tangling with the company's other bondholders – who are known collectively as the "ad hoc" committee in court filings – for close to two years. The firm objected to being left out of a new round of financing at the beginning of 2013 and has complained that it has been in the dark about discussions with other parties interested in making a deal with Mobilicity.
The company has struck several failed deals to sell to Telus Corp., which Catalyst has been critical of, arguing the transactions were doomed to fail due to the federal government's policy aimed at encouraging competition in the wireless industry.
Catalyst told the court it has outlined a plan for a financing of up to $400-million, of which it was willing to advance up to $300-million. It has also indicated it is open to financing Mobilicity's participation in an auction for wireless spectrum next year, but said few direct discussions have taken place and it has received little specific feedback on its proposals.
"Catalyst is very concerned that unless pro-active steps are taken immediately to arrive at a consensual restructuring to enable Mobilicity to participate in the upcoming spectrum auction, its value will erode even further – to the detriment of all stakeholders," a spokesman for the firm said Thursday. "Catalyst hopes that the company and its advisors will recognize the seriousness of the situation and act in the best interest of all stakeholders."
But Mr. Aziz said the company remains committed to achieving an outcome that benefits all those involved. "There are a number of potential paths forward and discussions continue with a number of parties," he said earlier this week. "While no agreement has been reached with any party at this time, we will continue to update stakeholders as warranted."
Justice Newbould granted Mobilicity a further stay of legal action against it by its creditors to Jan. 30, the same day as the deadline to register to take part in the spectrum auction.
Mobilicity had $415-million in long-term debt as of March 31, but this week's filings state it is currently operating on a "cash flow break-even basis" and its customer base is stable and sat at 154,914 as of Oct. 31.