CDC says motion of 3.75% exchangeable holders seeking repayment denied

By Angela McDaniels

Tacoma, Wash., April 28 - CDC Corp. said a New York court denied a motion filed by some holders of its 3.75% senior exchangeable convertible notes due 2011 that alleged a default and sought repayment of the notes.

The Supreme Court of New York, County of New York, denied the motion on Wednesday, according to a 6-K report filed with the Securities and Exchange Commission by subsidiary CDC Software Corp.

The motion was filed by Evolution CDC SPV Ltd., Evolution Master Fund Ltd., SPC, Segregated Portfolio M and E1 Fund Ltd., which are affiliates of Evolution Capital Management LLC.

The motion, which was filed Dec. 18, also sought accrued and retroactive interest and the reimbursement of fees and costs in the case.

CDC said its complaint against the Evolution group remains pending.

As previously reported, CDC filed a complaint against the group with the court on March 2 alleging breach of non-disclosure agreements, breach of the note purchase agreement, breach of the notes and tortious interference with business relations.

The complaint seeks recovery of compensatory damages, interest, attorneys' fees, litigation expenses and injunctive relief totaling more than $295 million.

CDC and CDC Delaware Corp. - the holder of $124,775,000 principal amount of notes - amended the notes on Nov. 11 to change the definition of qualified initial public offering to provide that CDC Software, CDC Games or any of their respective subsidiaries can consummate a qualified IPO and to reduce the amount of proceeds needed to achieve a qualified IPO to $40 million from $100 million.

As a result of the change, the company believes the put option previously granted to noteholders is no longer exercisable. CDC said the put option would have required it to pay approximately $54.1 million no later than Dec. 16, which includes the principal amount of notes held by the Evolution affiliates plus accrued interest at the rate of 12½% retroactive to the issue date of Nov. 13, 2006.

Georgia case

CDC began a lawsuit against the Evolution group on Oct. 30 in the Superior Court of DeKalb County, State of Georgia. On Feb. 26, CDC and Evolution filed a joint stipulation of dismissal under which the first amended complaint and counterclaims were dismissed without prejudice.

The suit alleged breach of the non-disclosure agreement, the purchase agreement relating to the notes, the covenant of good faith and fair dealing and fiduciary duty; wrongful disclosure and misuse of trade secrets; tortious interference with business relations; and civil conspiracy.

The company was seeking the recovery of more than $295 million in damages and expenses.

The Evolution group asserted counterclaims for breaches of representations, warranties and covenants and sought relief including the repayment by CDC of approximately $53 million of the notes plus interest at the default rate and damages.

CDC is a Hong Kong and Atlanta-based enterprise software and new media company.

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