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A Mobilicity outlet is shown in this undated photo.Kevin Van Paassen/The Globe and Mail

Just days from the deadline for deposits, Mobilicity says it has secured the financing necessary to register for an upcoming public auction for valuable cellular airwaves.

Pending court approval, the move will at least put the company in a position to compete with fellow startup carrier Wind Mobile for a swath of spectrum the federal government has earmarked for operating new entrants.

Mobilicity, which has been under creditor protection since September, 2013, filed materials late Monday asking the Ontario Superior Court of Justice to approve a new financing arrangement that will allow it to place a deposit of approximately $62-million on Friday.

Last Thursday, the company said it had still not secured the necessary backing, but William Aziz, the chief restructuring officer, said in an affidavit Monday that the company has reached an agreement to enter into a second debtor-in-possession (DIP) financing for $65-million from some of the company's existing debt holders.

The agreement is structured off an earlier DIP financing arrangement for $30-million the company entered into when it first filed for protection under the Companies' Creditors Arrangement Act.

The funding is contingent on court approval, which the company is seeking at a motion in Toronto scheduled for Wednesday.

The company plans to create a new, wholly owned subsidiary called Mobilicity SpectrumCo for the sole purpose of applying to participate in the auction.

Mr. Aziz said he is unaware of any secured creditors of Mobilicity who would be affected by the new financing who were not served with a copy of the new court materials.

Those parties include a number of bondholders who collectively hold the majority of the company's first-lien debt, as well as Catalyst Capital Group Inc., which holds about 30 per cent of Mobilicity's senior debt. Catalyst was not part of the original DIP financing.

In November, Catalyst said it was open to financing Mobilicity's participation in the auction, however, the Toronto-based private equity firm headed by Newton Glassman has long been at odds with the other bondholders.

A spokesman for Catalyst was not immediately available for comment Tuesday morning on the firm's position on the new round of financing.

Ottawa designed the rules of an auction of airwaves in the AWS-3 (advanced wireless services) frequency band to favour small carriers who already have existing wireless businesses by setting aside 60 per cent of the spectrum for operating new entrants.

Mobilicity and Wind are the only two players that qualify to bid on those set-aside licences in Ontario, British Columbia and Alberta. If Mobilicity had been unable to place a deposit, Wind could have acquired those licences for the opening bid price of $62.5-million.

If Mobilicity decides to make an actual bid in the AWS-3 auction, Mr. Aziz said the funding under the new DIP agreement could fund that bid in whole or in part. If the company requires additional funding beyond that, it will apply to the court for approval again, he said.

The deadline for sealed bids in the AWS-3 auction is March 3. Deposits for another auction of airwaves in the 2,500-megahertz frequency are also due Friday, but Mobilicity said last week it does not plan to take part in that auction, which will be held in April.

The company is still seeking an extension of a stay of legal proceedings against it from Jan. 30 to May 8.

Mr. Aziz said in an affidavit last week that by that point, after the two spectrum auctions have concluded, "the wireless spectrum landscape will have materially changed and [Mobilicity's] transaction options may be materially different than they are today."

While the auctions are ongoing, he noted, potential transaction partners will be focused on the bidding process and in some cases the auction rules will bar the parties from holding discussions around possible deals.

The two auctions will also put more spectrum into circulation and could make a sale of Mobilicity to one of Canada's incumbent wireless players easier for the federal government to accept.

Ottawa has blocked previous attempts by Mobilicity to sell to Telus Corp., noting it will not approve deals that lead to an undue concentration of cellular spectrum in the hands of Canada's incumbent national carriers.

The company acquired spectrum licences in the AWS-1 band in a 2008 auction for $243-million and those licences remain Mobilicity's main asset, although they have proven difficult to sell due to Ottawa's policy.

Mobilicity had 158,637 active users as of Dec. 31

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