SCO Group files Stephen Norris Capital-funded plan of reorganization

By Caroline Salls

Pittsburgh, March 3 - SCO Group, Inc. filed a plan of reorganization and related disclosure statement Friday in the U.S. Bankruptcy Court for the District of Delaware.

Stephen Norris Capital Partners and its partners from the Middle East have agreed to provide up to $100 million to finance SCO Group's plan of reorganization.

As part of the financing, Stephen Norris Capital will take a controlling interest in the company and take it private.

As previously reported, Stephen Norris Capital has developed a business plan for SCO that includes unveiling new product lines aimed at global customers.

This reorganization plan is also expected to allow SCO to see its legal claims through to their full conclusion.

Under the plan, all trade and unsecured creditors will be paid in full, and existing securities will be cancelled.

As part of the $100 million in financing, Stephen Norris Capital will provide $5 million to SCO on the plan effective date for a new class of series A preferred stock. Series A preferred stockholders will be able to convert the stock into between 51% and 85% of SCO's equity, depending on the amount drawn under the remaining $95 million in debt financing.

According to the disclosure statement, the debt financing will mature in five years. Interest will be Libor plus 1,700 basis points.

Plan creditor treatment

Treatment of creditors under the plan will include:

• Holders of administrative claims and priority claims will be paid in full in cash;

• Holders of miscellaneous secured claims will either receive the collateral securing the claim, retain the lien on the collateral or receive payment in full in cash;

• Holders of general unsecured claims will receive 100% of the principal amount of their claims, plus contract interest;

• Holders of equity interests in SCO Group will receive a beneficial interest in a plan trust that will include the company's new common stock, as well as warrants and options to purchase new common stock. SCO stockholders will also receive a $2 million initial distribution from the trust. The existing stock will be cancelled; and

• The equity interests in SCO's operating company will be retained by the reorganized company.

SCO said it will redeem all of the shares of new common stock held by the plan trust within one year after pending Novell and IBM litigation claims are resolved. Proceeds from the redemption will be distributed to holders of trust beneficial interests.

In addition, if SCO elects to make an initial public offering of its securities, sell substantially all of its assets or liquidate or wind-down the company before the new common shares are redeemed, the proceeds of the transaction will be distributed to trust interest holders.

The disclosure statement hearing is scheduled for April 2.

SCO, based in Lindon, Utah, develops UNIX software technology for distributed, embedded and network-based systems. The company filed for bankruptcy on Sept. 14. Its Chapter 11 case number is 07-11337.

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