Skyblade is referring to the battle in which Mustadio and Besrodio are captured by the Barte Company. Mustadio manages to join the battle as a hostage and enters the battle with no weapons or armor; bear in mind, however, that Mustadio is not required to survive the battle to win.

Mustadio has survived for me on a few playthroughs because he still access to his Snipe skill set. Because of this, if my characters are able to cross the map quickly enough, he will be able to escape to safety.