Wireless upstart Mobilicity has scoured the globe to find a willing buyer. Its financial advisers have contacted "more than 30" potential purchasers including incumbents, new entrants, international telecoms and U.S. private-equity firms, according to court documents filed as part of the company's restructuring.
But despite those "extensive marketing efforts," the Vaughan, Ont.-based carrier has yet to clinch a binding sale agreement. And time is running out for it to do so before its debt holders vote on two plans of arrangement related to its restructuring later this month.
"Given its current financial circumstances, the Mobilicity Group needs to either reach agreement with a willing buyer for its business who can finance the operations going forward, or it needs to restructure its capital and secure additional funding in order to advance its business," reads a sworn affidavit of William Aziz, president of Blue Tree Advisors II Inc., who was retained to act as Mobilicity's chief restructuring officer.
Late last month, Mobilicity, legally known as Data & Audio-Visual Enterprises Wireless Inc., obtained two court orders allowing it to pursue "strategic options" including a possible sale. If the firm fails to find a buyer, it will pursue a recapitalization plan to patch up its balance sheet, a move that should keep it operational – for now.
"The plan the company is pursuing leaves it in a good position and funded in any event as we continue to make progress pursuing various strategic options," said president and chief operating officer Stewart Lyons in an e-mailed statement Wednesday.
Debt holders are scheduled to vote on the two plans at meetings in Toronto on May 21, which leaves the carrier little time to seal a deal with a potential buyer.
Although Telus Corp. commenced takeover talks with Mobilicity earlier this year and is closely monitoring its restructuring process (it had a lawyer present for court proceedings last month, according to a source), the two companies have yet to reach a firm agreement. Even if a deal were to materialize prior to May 21, it is unclear whether the federal government would give its blessing to such a union.
Mobilicity, meanwhile, is fighting a separate court battle with one of its bondholders, private-equity firm Catalyst Capital Group Inc., over a financing deal announced earlier this year. Catalyst, which is headed by distressed-debt expert Newton Glassman, is also eyeing control of Mobilicity and its rival Wind Mobile and is lobbying Ottawa on the file.
All this, however, is raising questions about Mobilicity's future. In addition to searching for a buyer, the company unsuccessfully completed an investor roadshow in 2012 to raise financing. As a result, the company pursued its bridge financing earlier this year.
Still, the company's finances remain shaky, according to court documents, for which some law firm employees were enduring long line-ups this week to obtain.
"For the quarter ended December 31, 2012, the cost of maintaining the Mobilicity Group's network, paying distributors and other service partners exceeded revenue and financing proceeds by approximately $12-million prior to financing costs, or $30-million in total," reads Mr. Aziz's affidavit.
Sources have previously suggested that Mobilicity could be worth about $350-million to $400-million, if the company is mostly valued for its spectrum. But any acquirer would also need the wherewithal to tackle the company's financial woes, which have also been outlined as part of the case.
Mobilicity by the numbers
250,000 – number of subscribers.
$6-million – minimum monthly revenue.
$70.19-million – 2012 revenues, up from $51.66-million in 2011.
$387.46-million – total assets as of end of 2012.
$418.01-million – liabilities.
$74.3-million – annual operating loss.
$105.1-million – "Total comprehensive loss for the year," compared to $133.4-million for 2011.
Editor's note: Stewart Lyons' title has been corrected in the online version of this story.