Riverstone payout edges closer

If all goes according to plan, former Riverstone Networks shareholders should get their first, largest – and perhaps their only — check from the company in early October, and they should know the size of that check in mid-August.

RNI Wind Down Corp. – Riverstone’s bankrupt shell, formed after the sale of nearly all of the company’s assets to Lucent Technologies — filed a reorganization plan on June 30, detailing the terms of the distribution to the shareholders after RNI pays off its debts.

The key issue holding up distribution is figuring out how much of the more than $100 million in cash should be put in a reserve account for legal costs of current and former company officials and board members. The plan would set aside $7 million – to be tapped into after any liability insurance payout – for such a reserve account, with a cap of $1 million per officer.

But only current officers agreed to settle for that $7 million. Former officers – targets of past and current investigations into alleged fraudulent practices of the company – have already put in claims of some $5.65 million. Some of their legal costs could result from defending themselves against an investigation by the shareholders themselves, represented by the Bankruptcy Court-appointed Equity Holders Committee.

That committee hopes to complete its investigation at the end of August in time for a Sept. 12 hearing, Bill Baldiga, the attorney representing the committee, told NHBR Daily. The court may put more than $7 million aside, depending on the results of that investigation.

The plan still has to be approved by a federal bankruptcy judge and by a vote of creditors and shareholders. Shareholders should get a better idea of the amount to be distributed after a prospectus for that vote is released – now slated for an August 9 hearing.

Distribution of the reserve count – if it isn’t depleted by claims – would take years.

Shareholders were hoping to get as much as $1.50 a share out of the $207 million bankruptcy sale to Lucent, after debts are paid off and bankruptcy costs settled. That’s a tenth of the share price of the company when it was spun off from Cabletron Systems – once the state’s largest employer – in 2001.

The Securities and Exchange Commission halted its investigation into the company’s fraudulent accounting practices, but is still continuing its investigation into former officials of the company. – BOB SANDERS