SALT LAKE CITY (AP) -- A major lender is calling due $20 million in loans to SCO Group, a Lindon-based company that has made headlines with lawsuits over Linux-related copyright and licensing claims.
In a letter to SCO on Thursday, BayStar Capital cited unspecified breaches of the loan's terms in calling the loans. The move is a potentially crippling blow for SCO, which is embroiled in several lengthy and expensive court cases.
"This came as a surprise to us," SCO spokesman Blake Stowell said. "We are seeking more info from BayStar on exactly how they feel we breached the agreement.
"We feel like we've held to the terms completely," he added.
SCO has filed federal court suits against IBM, AutoZone, DaimlerChrysler and others. The company reportedly had less than $11 million in cash on hand before the BayStar investment was announced late last year, and has reportedly spent millions on legal fees since filing its initial March 2003 suit against IBM.
BayStar spokesman Bob McGrath declined comment on the move.
BayStar's letter claims unspecified violations involving sections of the agreement addressing SCO-related disclosures and publicity over a February 2004 addendum to the loan deal, which dealt with a swap of types of preferred stocks BayStar received.
BayStar now demands immediate redemption of 20,000 shares of SCO's Series A-1 convertible preferred stock. That comes to $20 million of the $50 million investment the company initially brokered last October.
The news sent SCO's stock tumbling 13 percent Friday. By the close of the Nasdaq Stock Market, SCO stock was going for $8.37 per share, down $1.29.
Laura DiDio, an analyst with the Yankee Group, called the BayStar development "distressing to SCO, its customers and other investors.
"If SCO is forced to comply, it could have an adverse impact on the company's financials and its ability to continue to wage the myriad high-profile legal battles," she said.
(Copyright 2004 by The Associated Press. All Rights Reserved.)