CDC reorganization plan objections resolved; amended plan confirmed

By Caroline Salls

Pittsburgh, Sept. 10 - The plan of reorganization filed by CDC Corp. and its official committee of equity security holders was confirmed on Sept. 6 by the U.S. Bankruptcy Court for the Northern District of Georgia after objections were resolved, according to a 6-K filed Monday with the Securities and Exchange Commission.

The company said it received limited objections to the plan from chief executive officer and former director Peter Yip; former CDC and/or CDC Software Corp. directors and/or officers Thomas M. Britt III, Raymond Ch'ien, Chung Kiu Wong, Fred Wang and Simon Wong; new Evolution litigation plaintiffs Evolution Capital Management, LLC, Evolution CDC SPV Ltd., Global Opportunities Fund Ltd., SPV, Segregated Portfolio M, Evo China Fund and El Fund Ltd.; and Rajan Vaz, owner of a 49% interest in CDC indirect subsidiary Software Galeria, Inc.

Limited objections

According to the 6-K, the limited objections related to the establishment of an appropriate claim reserve for disputed and unliquidated claims against the company before any proposed distribution of funds to CDC shareholders.

CDC said these disputed and unliquidated claims included the new Evolution litigation, claims for indemnification and advancement of defense costs made by former directors and/or officers to that litigation and a claim filed by Vaz.

The Evolution objections also raised concerns about the scope and effect of releases to the directors of CDC indirect subsidiary China.com, Inc. and the effect those releases would have on the litigation.

In addition, CDC said the limited objection filed by some of the current or former officers and directors dealt with the potential subordination of their equity holdings in the company.

Plan amendments

In response to the objections, CDC said it and the equity committee amended the plan to provide that no distributions to shareholders would be made before an appropriate reserve was established, either by agreement of the objecting parties or of the bankruptcy court.

Also under the amended plan, the scope and effect of releases to the directors of China.com would have no effect on the new Evolution litigation.

CDC said the issue of equitable subordination was preserved for later determination. None of the parties' respective rights or positions will be modified by plan confirmation, and they were preserved in their entirety for later judicial determination.

Also under the amended plan:

• All of the company's assets will be sold for the benefit of its creditors and eligible equity interest holders; • Chief restructuring officer Marcus A. Watson will act as the disbursing agent and reserve enough funds from the sale proceeds to pay all allowed claims in full;

• All of the company's remaining assets will be transferred to a liquidation trust to be liquidated for the benefit of the holders of allowed equity interests.

Watson will be the initial liquidation trustee. The trustee will have the authority to sell and/or dispose of trust assets and, after deducting all liquidation and administration costs and expenses, to make distributions of the remaining proceeds to the equity interest holders; and

• The amended plan also calls for the establishment of bar dates for administrative claims, priority claims and fees claims, the disposition of some intercompany obligations, the disposition of trust assets, termination of the company's ownership rights to its assets and authorization for CDC to begin the process required to end its public reporting obligations.

Based on the additions to the plan, the objecting parties said their objections to confirmation had been adequately addressed and that they no longer objected to confirmation of the amended plan.

CDC, a Hong Kong- and Atlanta-based enterprise software and new media company, filed for bankruptcy on Oct. 4, 2011. Its Chapter 11 case number is 11-79079.

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