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U.S. Trustee Moves to Convert SCO Bankruptcy to Chapter 7

By Pamela Jones et al.

Here it is, the moment many of you have been waiting for: the U.S. Trustee's office, through its counsel Joseph J. McMahon, Jr., has filed a motion in the SCO bankruptcy proceeding to convert the SCO's Chapter 11 to Chapter 7. And I think this will be your favorite sentence:

Additionally, not only is there no reasonable chance of "rehabilitation" in these cases, the Debtors have tried - and failed - to liquidate their business in chapter 11.

So what's left? Dismissal or, more logically, Chapter 7. SCO's been in Chapter 11 as long as it's supposed to be, and it's tried three times to figure out a "rehabilitation" plan, and nothing panned out. Meanwhile, SCO reports a net negative cash flow of more than $3.5 million in its March 2009 report. $3.5 million since the bankruptcy was first filed in September 2007, and that represents cause to switch to Chapter 7, the Trustee's Office argues, due to "substantial or continuing loss to or diminution of the estate and the absence of a reasonable likelihood of rehabilitation." That's $3.5 million that could have been paid to Novell.

I never expected SCO to be rehabilitated. Oh. Different definition. The Trustee's Office means "to put back in good condition; re-establish on a sound, firm basis." I mean to admit it was wrong, turn around and sin no more. Like *that* will ever happen.

It's conceivable SCO could come into court with a done deal, I suppose, with all their paperwork done and in order, as a counter. With SCO, I never say never. I'd want to see the real buyers in the flesh, though, if I were the judge, with their right hands on their heart and their left holding their wallets up before the judge, spilling over with dollars, so to speak.

Um. Real ones.

Full post as published by Groklaw on May 05, 2009 (boomark / email).