Physics of three-dimensional plasmoid-mediated magnetic reconnection during transient Coaxial Helicity Injection (CHI) plasma start-up is investigated using nonlinear MHD simulations in a spherical tokamak. We numerically examine (i) the role of three-dimensional magnetic fluctuations arising from current-sheet instabilities on the formation of plasmoid-mediated closed flux surfaces, and (ii) the effect of toroidal guide field on the MHD stability during transient CHI. We find that even in the presence of nonaxisymmetric edge magnetic fluctuations, current-carrying axisymmetric (n = 0) plasmoids are rapidly formed while twisted open field lines are being injected and are merged to form a large current-carrying magnetic bubble for plasma startup in a tokamak. It is also found that the 3-D physics response is drastically different for simulations at a higher toroidal field, and complete stabilization of nonaxisymmetric fluctuations was achieved at a higher toroidal flux.