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An Objection to SCO's proposed reorganization raises questions about SNCP

By Pamela Jones et al.

Time to catch up with numerous filings in the bankruptcy. Folks heard about the proposed reorganization and may be smelling money in the air, I gather, because here comes a creditor, Citi Financial, who's decided it's worth it now to hook a car to the creditors' train and send in their lawyers. We'll see if there really is any money, though. Another creditor, Main 10, has transferred its claim to Argo Partners, and another set of SCO's monthly operating reports were filed. And there's another pro se Objection [PDF], this time to the reorganization plan.

It's considerably more interesting than the previous one and raises some valid questions, although I continue to wish they had been brought to the US Trustee's Office. One good thing is it's been filed early enough that others can build on it, should they choose to. And the research done, as seen in the exhibits attached to the Declaration in Support [PDF] of the objection, raises another issue, not directly highlighted in the objection: what entity exactly is offering to do this deal? The SCO press release about the proposed deal may be inaccurate in an important aspect. Either that or the MOU is. The press release stated that Stephen Norris Capital Partners was doing the deal, that it was a limited partnership, without specifying in which state, and it listed Norris as "managing partner" of SNCP:

"We saw a tremendous investment opportunity in SCO and its vast range of products and services, including many new innovations ready or soon to be ready to be released into the marketplace," said Stephen Norris, managing partner for SCNP....

About Stephen Norris Partners

Stephen Norris & Co. Capital Partners, L.P. is a private equity investment partnership formed to (i) "co-invest" alongside well established and successful private equity and leveraged buyout firms, (ii) take advantage of the business experience and relationships of its Investment Committee, including Steve Norris' long-standing relationships and substantial private equity experience.

While the press release says that SNCP is a partnership, the MOU says it's a deal between SCO and STEVE NORRIS CAPITAL PARTNERS, LLC and it defines SNCP as "Stephen Norris Capital Partners, LLC" and it further says it's a Delaware limited liability company ("Investment Team: Stephen Norris Capital Partners, LLC, a Delaware limited liability company ("SNCP").").

So my first question has to be: which type of entity is doing this deal? An LP or the LLC? And which LLC? Is it a Delaware LLC, which the objector searched for and can't find, or a Florida LLC, which he did find? Is there any such Delaware LLC? If so, it must be very recently formed if the objector's search couldn't find it. The objector asked SCO's lawyers, and they say they've asked SCO and will get back to him. What's that about? Did they do any checking on this proposed deal to make sure it isn't flim flam? Which entity is really doing this deal? And which one has the money, if any of them? How do you know? And if it's an LLC, who is guaranteeing the money? An LLC means limited liability company, and that means what it says.

Full post as published by Groklaw on February 27, 2008 (boomark / email).