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Audio recording of SCO bankruptcy hearing on Friday November 16

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Unread 14-12-2007, 04:00 PM   #1
Al Petrofsky
Posts: n/a
Audio recording of SCO bankruptcy hearing on Friday November 16

I've made available on the following page the court's audio recordings
of the hearing on Friday, November 16, 2007, in In re: The SCO Group,
Inc., et al., No. 1:07-bk-11337-KG (Bankr. D. Del.):

The main item on the agenda that day was SCO's motion (docket #149)
for approval of the proposed auction of those assets in which York
Capital was interested. The motion was filed on October 23, captioned
as an "emergency motion" and noticed for hearing on November 6, but
later continued to November 16. Because SCO had still not filed all
the terms of the proposed deal, another continuance was needed.

The only issue on which the court heard argument on November 16 was
that of how long the next continuance should be. SCO argued for a
short continuance to Tuesday, November 20. Novell, IBM, and the
U.S. Trustee all argued that that would be too short, and would likely
result in the expense of everyone showing up yet again just to be sent
home for another continuance. They all suggested waiting until the
next regularly scheduled hearing date, December 5.

Judge Gross's ruling came at 15:41:05 (at +00:24:35 in part 2 of the

15:41:05 THE COURT: I'm going to schedule this for December the

I'm giving the parties an opportunity to finalize their positions,
to identify the assets -- I heard, for example, that York is
interested in buying, you know, a very small operating company,
UNIX. But, as I've read the papers thus far, York is, itself,
investing itself in a lot of these more complicated issues. But we
really have to sort that out, I think, further, and I just don't
think that it is realistic, reasonable, or wise to proceed on
Tuesday, have people come back, when I know that we would be a
little bit better off than we are today as far as people
understanding the nature of the transaction, but not enough to
really assist everyone, including me, in arriving at an appropriate
decision. So I just think that -- we'll have to see. I am not
pre-judging where we go after December Fifth, and what that
schedule might be depending on what I hear on December Fifth, but I
just think that we would all be making a huge mistake to proceed so

Judge Gross's comment about York Capital saying it was simply trying
to purchase the UNIX operation was in reference to these earlier
statements from Scott McNutt for York Capital (at +00:20:41 in part 2
of the recording):

15:37:11 MR. MCNUTT: Now, York is a number of investment funds,
it's very well established, it's very [one unknown syllable]. One
of those funds likes to buy legacy software companies.

This is a legacy software company.

Buried in this -- I don't want to use an unfriendly term, but
buried in all of this complexity of this multi-year litigation,
there is a little, healthy legacy software company called UNIX. We
want to buy it.

Now, for business reasons, to put this into a fund in this year, we
need to close it by year-end. It's just a simple business issue,
and we'll walk away from the transaction if we can't do that.

We have increasing desire to walk away from this transaction.

This is a small transaction. It has some defined parameters. Now
we find ourselves actively arguing with the likes of Cravath,
Morrison and Foerster, and other lawyers that, given the chance,
will turn this into a very complicated proceeding, and a deal that
maybe could have been done for a modest price is now coming at a
much higher price, with no end in sight, unless we get to that
point where we actually are able to buy the assets. Then we will
either have them or not, we will take our lumps or not, and we'll
have realized the value that we believe to be here.

As Judge Gross noticed, this claim of being focused on "a little,
healthy legacy software company called UNIX" doesn't square with York
making a purchase offer that included a bunch of bullshit (to use "an
unfriendly term") about future proceeds from SCO's bullshit Linux
litigation. York's offer even based its statement of the "Purchase
Price", which it alleged to be $36 million, on the ridiculous
assumption that the Linux litigation would result in proceeds of at
least $50 million (with York getting at least $40 million of the
theoretical proceeds and $10 million going to SCO to make up $10
million of the $36 million "Purchase Price"; see the Term Sheet, dated
October 19, docket #149-2, at p. 3 and p. 5, and the proposed Asset
Purchase Agreement, filed November 16 (half an hour before the
hearing), docket #215-2, sect. 3.1 and 3.1(c)).

Judge Gross's written order setting the next hearing date for the
asset sale motion and related deadlines was entered on Monday,
November 19, in docket #221. The schedule called for SCO to file, at
long last, "all documents related to and in support of the motion", by
Noon on Tuesday, November 20. Two minutes before the deadline (at
which time SCO had still not filed, among other things, a copy of the
Cross License Agreement that was to be an integral part of the
proposal), SCO said "Let's call the whole thing off", and withdrew the
motion (see docket #225). (No word yet on when SCO will be attempting
to call the calling off off.)


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