A judge has approved the distribution of funds in Mobilicity's restructuring proceedings after the small wireless carrier struck a $465-million deal to sell itself to Rogers Communications Inc.
The court's order Monday was necessary for the companies to proceed on closing the deal, which they announced last week and which already has approval from the federal government and faces no opposition from the Competition Bureau.
A group of Mobilicity's creditors – including its bondholders as well as suppliers including customer-support provider Amdocs, network manager Ericsson Canada Inc. and landlords for its cellular sites – consented to a "vesting" order the company put forth to Ontario Superior Court of Justice judge Frank Newbould.
The order, which the judge signed Monday afternoon, will allow Rogers to assume Mobilicity's assets free and clear of any claims against them apart from the small carrier's trade liabilities, which Rogers has agreed to assume. The purchase price of the deal is $440-million and Rogers has agreed to assume $25-million in net negative working capital, according to a spokesman for Mobilicity.
The order will see Rogers transfer a portion of the purchase funds as a loan to repay Mobilicity's first lien, second lien and debtor-in-possession (or DIP) financing. These creditors will fully recover the principal they advanced as well as accrued interest and penalties.
However, Mobilicity's total debt stands at about $600-million, according to court filings, and the balance of the funds from the purchase will be distributed to the company's unsecured creditors on a pro rata basis.
Toronto-based private equity firm Catalyst Capital Group Inc., one of Mobilicity's biggest individual bondholders, was often at odds with Mobilicity's other bondholders throughout the restructuring process. Even before Mobilicity filed for protection under the Companies' Creditors Arrangement Act in September, 2013, Catalyst had already launched a lawsuit against the company for raising a round of financing without Catalyst's participation.
The firm struck a separate, confidential agreement with Rogers as part of the overall transaction.
There was some delay Monday morning as lawyers for various creditors negotiated last-minute changes to the vesting order. One change to the final order, for example, will give landlords at Mobilicity's cellular sites – which are often found on building rooftops – 30 days to object to the transfer of their lease agreements to Rogers.
Otherwise, the events of the past week have brought the company's restructuring to a rapid conclusion after a drawn-out process that at times saw stakeholders frustrated with what they saw as a change in government policy, as Ottawa blocked multiple attempts to sell to Telus Corp.
Although investors in the wireless industry initially believed they would be able to sell spectrum reserved for new entrants in a 2008 auction to one of the Big Three carriers after five years, Ottawa introduced a new spectrum transfer framework in 2013 and indicated it would not permit deals that increased the concentration of the airwaves used to build wireless networks in the hands of the incumbents.
The federal government ultimately approved last week's deal with Rogers – along with a separate agreement Rogers made in early 2013 to purchase unused spectrum licences from Shaw Communications Inc. for a total of $350-million – in part because the transactions also include the transfer of spectrum licences to Wind Mobile Corp., the last remaining new entrant offering service in Ontario, British Columbia and Alberta.
In addition to Mobilicity's 157,000 subscribers and spectrum licences, Rogers will also acquire tax losses valued at $175-million.
The deal is expected to close later this week.