Earlier this summer an affiliate of Rogers Communications Inc. acquired all of the issued and outstanding shares of the corporation carrying on the Mobilicity wireless business in the context of Mobilicity's Companies' Creditors Arrangement Act (CCAA) proceeding.
The transaction was unique in part because of the speed at which it was completed. While Mobilicity undertook a sale process in early 2014, that process did not result in a completed sale transaction, leaving the company without a clear path to completion of the CCAA process until the Rogers transaction emerged and was completed on an expedited basis.
A typical insolvency sale occurs following a structured and court approved sale process in which the highest and best offer is accepted. In certain circumstances, such a process is either not possible or not warranted. This could be the case if:
- evidence is available to show that in the absence of a current sale process, the proposed transaction has still resulted in acceptable value for the assets in question;
- there is urgency to complete the proposed transaction immediately and the risk of losing that transaction is greater than the potential benefit of further exposure of the assets to the market; and
- the transaction has the support of a large portion of the influential creditors in the insolvency proceeding.
If the above circumstances exist and one is able to present a compelling transaction that has significant stakeholder support, a potential purchaser may be able to avoid an extended formal process.
A key to this strategy is negotiation with the right parties, including influential creditor groups whose support will be essential in moving forward with an expedited transaction.
In most cases the creditor group with the greatest influence will be the group of creditors that expects to receive some recovery but not a full recovery. If these creditors are sufficiently cohesive to negotiate as a group and are supportive of an expedited transaction, that transaction has a strong chance of success. This group will have great influence over the acceptability of a particular transaction and a particular offer price. Knowing the expectations that this group has about their potential recoveries will be essential to structuring an offer.
If these creditors are not a cohesive group, negotiating an expedited transaction will be exceptionally difficult irrespective of how interested the insolvent seller may be in completing such a transaction.
In the case of the Mobilicity transaction, each of the above factors came together in a manner that allowed a transaction that could be completed on an expedited timeline with the support of all key stakeholder groups. Norton Rose Fulbright Canada LLP was counsel to the Mobilicity Group in this successful transaction.
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