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SCO Withdraws Motion for Auction; Hearing Cancelled
Thursday, March 12 2009 @ 04:17 PM EDT

Well. What a surprise. SCO has withdrawn its Motion for an Order Establishing Sale and Bid Procedures, Approving Form of Asset Purchase Agreement, etc. I think they figured out the cavalry was on the top of the ridge, ready to fight to block that motion. IBM shredded SCO's motion like a chimp on Prozac, and then Novell put out the lights. How many times do these two have to file oppositions to SCO's reorganization schemes before SCO actually follows through with one that can be approved? Who knows? It's a joke to me already, so we might as well just laugh. IBM and Novell probably don't find it so amusing, having to pay lawyers to respond to this kind of thing.

So another hearing bites the dust. If you were planning to attend on March 16, don't go. It's off. SCO withdrew the motion without prejudice, and it's in bold type, so they may just be licking their wounds and circling around to try another day.

Here are the filings:

03/12/2009 - 717 - Notice of Withdrawal of Debtors' Motion for an Order (I) (A) Establishing Sale and Bid Procedures, (B) Approving Form of Asset Purchase Agreement, and (C) Approving the Form and Manner of Notice of Sale; and (II) Approving (A) Sale of Certain Assets Free and Clear of Interests and (B) Assumption and Assignment of Executory Contracts and Unexpired Leases (related document(s) 695 ) Filed by The SCO Group, Inc.. (Attachments: # 1 Affidavit of Service and Service List) (Makowski, Kathleen) (Entered: 03/12/2009)

03/12/2009 - 718 - HEARING CANCELLED. Notice of Agenda of Matters Scheduled for Hearing. Filed by The SCO Group, Inc.. Hearing scheduled for 3/16/2009 at 02:00 PM at US Bankruptcy Court, 824 Market St., 6th Fl., Courtroom #3, Wilmington, Delaware. (Attachments: # 1 Affidavit of Service and Service List) (Makowski, Kathleen) (Entered: 03/12/2009)

Here is the SCO motion that it just withdrew and you can find the exhibits here. What does the withdrawal mean? I have no idea. I can only guess. Maybe there's no buyer panting in the wings yet? Or the hoped-for stalking horse broke its leg? Or SCO can't figure out how to answer the objections IBM and Novell raised? Maybe the new representative from the US Trustee's Office had a little chat with SCO? Time will clarify for us what is happening. I learned long ago to relax.

How's this for a suggestion? How about setting the date for the auction *after* SCO gets a plan approved, should that ever happen, so it knows what it can auction? What? Too logical?

IBM's opening remarks in its opposition says it all:

1. The Motion and attached documents do not answer basic questions about the Debtors' proposed asset sale: What is the urgency to approve the terms of the asset sale, particularly if the Debtors are not presently entertaining any proposed bids on the assets? What products and services are included in the assets proposed to be sold? is the proposed procedure the right one? How will the bidder protections be applied? The burden should not be on creditors or this Court to search for the facts and justifications for a sale. Rather, the Debtors must set forth this and other required information before even bid procedures may be approved.

2. The Motion (i) lacks a justification for approving the proposed asset sale now, (ii) lacks adequate information describing the assets to be sold or the proposed sale process; (iii) lacks adequate information about the proposed method for choosing a "stalking horse" bidder; and (iv) lacks adequate information about the proposed bidding procedures. The Motion, form of asset purchase agreement, proposed bidding procedures and sale notice are all deficient in themselves and should not be approved. (See Section A below.) The proposed bidder protections are inadequately described and misleading. (See Section B below.) Finally, the Debtors' proposed sale notice fails to identify the products and services comprising the assets being sold, and it fails to provide an accurate description of the terms and conditions of the proposed asset sale. (See Section C below.)

3. For these reasons, as explained more fully below, this Court should deny the Motion.

To fund the Amended Plan, the Debtors propose a combination of continued business operations and possible auction sale of some of their assets. The Amended Plan proposes to pay most creditors in full quickly, but considerably stretches out payment of one of the two classes of general unsecured creditors: the class of general unsecured creditors, such as Novell, International Business Machines ("IBM") and Red Hat, against whom the SCO is in prepetition litigation. As certain pivotal plan terms reflect, the Debtors themselves recognize that they may be unable to pay these litigation creditors in full, so the Amended Plan proposes to pay them in new SCO stock if cash to pay them is in insufficient. In the meantime, however, SCO's current shareholders will be able to keep their existing stock. Clearly, the Debtors' ability to fund the Amended Plan is crucial to all creditors, but especially the litigation creditors. Hence, a thorough analysis of the Debtors' business plan, the proposed auction, and the claims the Debtors may have to pay, is indispensable to help creditors decide whether to vote for the Amended Plan. Yet, the Amended Disclosure Statement fails to provide the kind of meaningful information that would enable creditors to judge the Debtors' prospects of meeting their commitments under the Amended Plan. For this reason, the Court should deny approval of the Amended Disclosure Statement. The Court should also disapprove the Amended Disclosure Statement because the Amended Plan is unconfirmable on its face as violating the absolute priority rule in permitting existing shareholders to retain their stock even though its terms explicitly anticipate that litigation creditors may not be paid in full.
The problem, in plain English, as I see it from the two objections is that SCO would like to sue the World and Its Dog and yet, when it loses, not have to pay damages except with Monopoly money, so to speak.

Update: I can't resist. Our own Steve Martin has been inspired by SCO's withdrawal of this motion to burst into song:

Ya put yer first plan in,
Ya take yer first plan out,
Ya put yer next plan in,
and ya talk it all about.
There is no confirmation
so you pull it all back out,
and that's what you're all about.
While the plan hasn't yet been pulled, just the auction, he's enjoying some creative license.


SCO Withdraws Motion for Auction; Hearing Cancelled | 144 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
without prejudice?
Authored by: Christian on Thursday, March 12 2009 @ 04:34 PM EDT
I don't think SCO can withdraw the motion "without prejudice." It is up to the
judge whether they get a free do-over. I recall they tried this before.

[ Reply to This | # ]

Corrections Thread
Authored by: Marc Mengel on Thursday, March 12 2009 @ 04:38 PM EDT
Please put corrections like "worng -> right" in the subject..

[ Reply to This | # ]

Authored by: DaveJakeman on Thursday, March 12 2009 @ 04:42 PM EDT
...when do the creditors get to file their own plan?

Monopolistic Ignominious Corporation Requiring Office $tandard Only For

[ Reply to This | # ]

Newspick discussions here please
Authored by: tiger99 on Thursday, March 12 2009 @ 06:29 PM EDT
Please remember to indicate which Groklaw newspick item you are referring to in
the title of your post.

[ Reply to This | # ]

Off topic here please
Authored by: tiger99 on Thursday, March 12 2009 @ 06:32 PM EDT
Things which are off the topic of the article but of interest to the Groklaw community can go here. Please remember to make clickable links where possible, and test in preview mode before posting.

Oh, and if using clickies, you do need to be in HTML mode. I speak as one who forgot to do that at least once.....

[ Reply to This | # ]

Excuse me please
Authored by: Tufty on Thursday, March 12 2009 @ 08:22 PM EDT
I am so surprised.


Linux powered squirrel.

[ Reply to This | # ]

So now is the time to discover the teeth of the trustee
Authored by: Anonymous on Thursday, March 12 2009 @ 08:26 PM EDT
I rememeber in some hearing last year, the gracious Mr McMahon(sp?), acting on
behalf of the office of the trustee saying something along the lines of
"this case cannot take a third episode".

This is the third episode. This is when we discover the teeth of the office of
the trustee.

So far - not a chirrup.

[ Reply to This | # ]

SCO Withdraws Motion for Auction; Hearing Cancelled
Authored by: Anonymous on Thursday, March 12 2009 @ 10:54 PM EDT
How many times do these two have to file oppositions to SCO's reorganization schemes before SCO actually follows through with one that can be approved?

There's a big problem with that: they need a plan that results in actual operating profits and positive cash flow. Two, three years ago they could have done that by folding the "SCO Source" tent and concentrating on marketable products. Today the cash is all but gone, their products are dated, market share lost, and many developers have left for greener pastures. They aren't making money, nobody is interested in buying it as a going concern, and economic trends point to even more deterioration.

In a way, SCO may have had it right: the best deal for their creditors probably is chapter VII liquidation. But the auction proceeds will belong to the creditors, not SCO.

[ Reply to This | # ]

SCO Withdraws Motion for Auction; Hearing Cancelled
Authored by: TerryL on Friday, March 13 2009 @ 04:01 AM EDT
Are we into a "spite zone" here, where SCO are just trying to rub
IBM's (and Novell's) nose in the fact it probably would have been cheaper to buy
them than to pay and pay and pay for legal types to stomp the stuffing out of
them to the point they are no more?

All comment and ideas expressed are my own and do not necessarily reflect those
of any other idiot...

[ Reply to This | # ]

  • Nah - Authored by: bezz on Friday, March 13 2009 @ 04:16 AM EDT
    • Nah - Authored by: LaurenceTux on Friday, March 13 2009 @ 09:40 AM EDT
  • Beyond spite - Authored by: Anonymous on Friday, March 13 2009 @ 02:50 PM EDT
    • Beyond spite - Authored by: Anonymous on Friday, March 13 2009 @ 05:18 PM EDT
Authored by: Ian Al on Friday, March 13 2009 @ 05:35 AM EDT
That must be what we are seeing while we wait for IBM and Novell to find
anything in SCO's motion to which they can agree.

When I first read the proposals I considered the auction on the steps of the
courthouse and the pipe dream future revenue prospects without supporting facts
showed that SCO were in no way serious about the plan.

My thought is that it was intended as something to support the motions for
extended exclusivity. If they had no evidence of even working on plans I think
the judge would have given them the benefit of the guilloteen.

Ian Al

Linux: Viri can't hear you in free space.

[ Reply to This | # ]

What does SCO have that's worth an Auction?
Authored by: Anonymous on Friday, March 13 2009 @ 11:53 AM EDT
Maybe Groklaw can help SCO out by suggesting items that they might be able to
auction off to raise fund to pay the creditors?

1) Records and testimony leading to charges against anti-linux conspirators.

2) Records and testimony leading to corruption charges against government

[ Reply to This | # ]

It may all be Academic
Authored by: TomWiles on Friday, March 13 2009 @ 04:58 PM EDT
According to SCO's last 10K, which is months old now, SCO owes more in legal
fees to their lawyers than the company has in gross assets.

At some point the court is going to have to start approving some of these fees,
and there is no money to write the checks.

At that point CH 11 (I believe) has to be converted to CH 7.

The only question that remains will be who gets what?


[ Reply to This | # ]

Hokie Pokie sums it up!
Authored by: cbc on Saturday, March 14 2009 @ 08:40 AM EDT
SCO is still Hokie and oh-so Pokie. What a great lyric!

[ Reply to This | # ]

SCO Withdraws Motion for Auction; Hearing Cancelled
Authored by: UnixGuy on Saturday, March 14 2009 @ 03:10 PM EDT
I think if you look at the terms of the proposed auction, the central point is
that SCO would designate a "Stalking Horse" bidder for all their
assets, selected on its own with no overview by other parties; then if the
auction didn't go through or the sale did not complete, the "Stalking
Horse" would get paid all sorts of extra break-up fees for the non-deal,
including 3% of their proposed bid on each part, plus extra "costs"
for each part.

In other words, the auction proposal is just like the past payments SCO wanted
to make to York Capital out of the goodness of its heart, for non-participation
in a non-plan.

In my opinion, it was proposed as a way to smuggle another chunk of cash out of
the company, unsupervised, to a party not legally related to SCO which would
turn out to be controlled by the same principals or which would then owe the
principals favors.

[ Reply to This | # ]

SCO Withdraws Motion for Auction; Hearing Cancelled
Authored by: Anonymous on Sunday, March 15 2009 @ 08:50 PM EDT
So what now will happen with the motion to approve the "reorganization plan" SCOGBK #694 ... I suppose we shall have to wait a week or so ...

[ Reply to This | # ]

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