A move by wireless startup Mobilicity to raise some much needed debt financing is facing interference from a private equity firm.
Catalyst Capital Group Inc. of Toronto filed an application before the Ontario Superior Court of Justice on February 25 asking the court to stall decision on a $ 75 million financing agreement signed by Mobilicity in February 6.
Catalyst, a firm that specializes in taking control of distressed and undervalued Canadian companies, may have purchased senior debt issued by Mobilicity during an earlier offering, according to a report by the Financial Post.
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Mobilicity on the other hand, characterized Catalyst’s petition as premature and called on the court to reject or temporarily stay the application.
Catalyst and Mobilicity are set to appear in court on March 26.
Mobilicty raised $215 million in 2011 through a debt offering. In a notice of motion dated March 7, the wireless company said Catalyst claims to hold certain senior secured notes. Neither Catalyst nor Mobilicity has disclosed the size of the equity firm’s position.
In a statement released February 12, Mobilicity announced that it had entered into a $75 million second lien financing.
The first stage of the financing will consists of a $35 million facility provided by certain lenders (the Lenders) and the second stage will consist of a $40 million follow-up facility that will be backstopped by the Lenders,” the Mobilicity statement said.
The company said the first stage was being made available in three draws and that at the time of the announcement, the first draw of $15 million had been completed.
Mobilicity also said that certain debt holders will have the right to subscribe as lenders under the follow-on facility. Money from the follow-on facility will be used to repay the first $35 million facility in full.
Mobilicity is among the new wireless companies competing with incumbents Rogers Communications Inc. Telus Corp. and BCE Inc. Mobilicity began its discount wireless business after acquiring airwaves in a 2008 spectrum auction held by the government.
Last Thursday, Industry Minister Christian Paradis announced a new wireless spectrum auction set for November 19.
Stewart Lyons, Mobilicity president and COO, had earlier said he was not sure if his company will be able to participate in the auction due to hardships in raising money.