Item 2.02 Results of Operations and Financial
Condition.
Liquidation and Dissolution Update
On May 28, 2020, in furtherance of its Plan of Complete
Liquidation and Dissolution, Altaba Inc. (the “Fund”) filed with
the Chancery Court of the State of Delaware (the “Court”) a
verified petition (the “Petition”) for determinations pursuant to
Section 280 of the General Corporation Law of the State of
Delaware (the “DGCL”). The Petition requests an interim order and
final order determining the amount and form of security that will
be reasonably likely to be sufficient to provide compensation for:
(i) claims that are the subject of a pending action, suit or
proceeding to which the Fund is a party; (ii) other claims
asserted in response to a notice provided by the Fund under
Section 280(a)(i) of the DGCL, as to which the amount and form
of security for such claims has not been agreed upon by the
parties; (iii) costs and expenses through the completion of
the wind-up process; and
(iv) other claims, if any, that are not barred under
Section 280 and have not been made known to the Fund or that
have not yet arisen but that, based on facts known to the Fund, are
likely to arise or become known within five years after
October 4, 2019, the date of dissolution of the Fund (the
“Effective Time”), including contingent, conditional or otherwise
unmatured contractual claims.
As described in the Petition, a copy of which is filed as an
exhibit to this Form 8-K and is incorporated by
reference herein, the Fund will first seek an interim order from
the Court (the “Interim Order”) that approves an initial
conservative aggregate amount of security of approximately
$7.3 billion. In addition to undisputed claims (including
claims where the Fund has agreed with the claimant on the required
amount of security, either initially or following negotiation),
this security amount includes, for each claim as to which the
amount is in dispute, the full amount requested by the relevant
claimant. The Fund is requesting this relief in order to be able to
make a cash distribution of up to approximately $5.6 billion,
representing all of the Fund’s assets in excess of the aggregate
security amount approved in the Interim Order, without having to
wait for the Court to adjudicate the amounts of security reasonably
likely to provide sufficient compensation for the claims in
dispute. Additional distributions are not expected to be made until
a determination has been reached by the Court regarding the amount
and form of security reasonably likely to provide sufficient
compensation for such disputed claims and the Court’s issuance of a
final order, as described below. The Fund is not able to predict
with certainty when the Court will address the Fund’s Motion for
Interim Distribution. The Court is not typically requested to
authorize such an Interim Order in proceedings of this kind, and
there can be no assurance that the Court will approve the Interim
Order and permit the distribution of excess assets based on the
Interim Order or when such distribution, if approved, will
occur.
Thereafter, the Fund will request a final order from the Court (the
“Final Order”) establishing the final amount and form of security
for contested known, contingent and potential future claims that
are likely to arise or become known within five years of the
Effective Time (or such longer period of time as the Court may
determine not to exceed ten years after the Effective Time), pay or
make reasonable provision for the Fund’s uncontested known claims
and expenses (including any changes to amounts agreed by the Fund
and claimants following the issuance of the Interim Order), and
establish reserves for other claims as required by the Final Order.
In the Final Order, the Fund currently intends to ask the Court to
approve an aggregate amount of security of approximately
$1.4 billion, subject to resolution of any claims after the
date of the Initial Order and before the date of such request. The
Final Order will reflect the Court’s own determination as to the
amount and form of security reasonably likely to provide sufficient
compensation for all known, contingent and potential future claims
against the Fund. There can be no assurance regarding the timing
and provisions of the Final Order and the Court may require the
Fund to withhold an aggregate amount of security in excess of the
amount that we believe is reasonably likely to satisfy the Fund’s
potential claims and liabilities. In addition, the Fund cannot
predict the impact, if any, of the Covid-19 pandemic on the timing of
proceedings in the Court, and it is possible that delays could
result. There also can be no assurance as to the timing or amount
of any additional distributions that we may make subsequent to the
distribution we intend to make immediately following the entry of
the Interim Order.
Any amounts proposed or determined to be held as security for
claims against the Fund in the Petition, the Interim Order or the
Final Order, or any such amounts actually held as security by the
Fund, have not been, and will not be, calculated in accordance
with, or by reference to, U.S. GAAP and do not, and will not,
reflect any change in the Fund’s current position with respect to
its liabilities and reserves from an accounting perspective.
Rather, in the case of the Interim Order, such amounts will reflect
either the amount of security currently requested by the claimant,
or the security amount such claimant has negotiated with the Fund.
For the Interim Order or the Final Order, the Fund may agree with a
claimant to set aside an amount as security that exceeds the amount
the Fund believes it will ultimately owe such claimant, in order to
allow more efficient distribution of excess funds pending final
resolution of the liability. Furthermore, under the Final Order,
for claims for which a security amount has not been separately
negotiated, the amounts held as security will be those calculated
by the Court to ensure that the Fund has sufficient assets to
comply with its obligations to provide adequate security pursuant
to the dissolution procedures under Section 280 of the DGCL,
which is generally a more conservative standard than the
determination required by U.S. GAAP.
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