Citing the financial and legal issues raised by the company’s inability to file audited financial reports for the 2000, 2001, and 2002 fiscal years, San Diego, CA-based Peregrine Systems, a provider of service and asset management software, has filed a voluntary petition to re-organise under Chapter 11 of the US Bankruptcy Code.
Excluded from the filing are all of Peregrine’s other subsidiaries, including those located outside of the US, and Peregrine Solutions, a new wholly owned subsidiary established to enhance customer relationships.
Peregrine has entered into an agreement whereby BMC Software will acquire all of the assets and assume substantially all of the liabilities of its ‘Remedy’ business unit for $350 million. To facilitate the transaction, Remedy has also filed a voluntary Chapter 11 petition. The sale agreement is subject to approval by the US Bankruptcy Court for the District of Delaware, under Section 363 of the US Bankruptcy Code.
Peregrine has received a commitment for up to $110 million in debtor-in-possession (DIP) financing from BMC Software. The DIP financing will replace the company’s existing senior credit facility. These funds will be used to enable the company to meet its commitments to its employees, to fund vendor obligations going forward, and to assure uninterrupted business operations. The proceeds from the sale of Remedy will be used to pay back the DIP financing and to settle past debts. The remaining proceeds from the sale will provide the company with funds to continue operating its business.
The company also announced that its board has directed outside counsel to file a lawsuit against Arthur Andersen, LLP, Arthur Andersen Germany and Arthur Andersen Worldwide SC, Daniel Stulac, the audit partner on the account, and other defendants to be named later, seeking damages in excess of $250 million for each of the four causes of action in the complaint.
The lawsuit alleges that the aforementioned defendants were negligent, engaged in fraud and breached their audit and accounting duties and responsibilities.