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Tuesday, Sept. 24, 2002

Peregrine listed assets of $1.7 billion and more than $607 million in liabilities in its filing Sunday in U.S. Bankruptcy Court in Delaware. The Chapter 11 petition is the latest in a series of events that began in May with the disclosure of irregularities in financial statements audited by Andersen.

An internal investigation found the company had inflated its revenue by as much as $250 million from April 1999 to the end of 2001.

Also, the company said it was selling its Remedy unit for $350 million to Houston-based BMC Software Inc. In exchange, BMC has committed up to $110 million in financing to help Peregrine pay loans and meet its daily needs for the next few months.

"Looking ahead, we fully expect to emerge from Chapter 11 as a financially stable company, better positioned than ever to meet the infrastructure software management needs of our customers," Peregrine Chief Executive Officer Gary Greenfield said in a statement.

Peregrine's board voted to sue Andersen in San Diego County Superior Court for allegedly allowing incorrect audits that overstated revenues by as much as $250 million to be filed for the 2000-2002 fiscal years. The lawsuit will seek an estimated $1 billion in damages.

"The board trusted our former independent auditors, Arthur Andersen, and they failed to live up the responsibilities required in that relationship," said Greenfield.

Andersen was convicted in June of obstruction of justice for the shredding of documents from audits performed at now-bankrupt Enron. Andersen has lost numerous clients and no longer audits public companies.

Peregrine's bankruptcy filing capped a spectacular dive that began last spring when a review of the company's performance found that revenues had been wildly overestimated by $250 million. Since then, Peregrine's over-the-counter shares fell from around $7 to just under 10 cents early Monday. Its workforce has been pared from 3,450 to fewer than 700.

The company has been hit with a number of shareholder lawsuits and is under investigation by the Securities and Exchange Commission.

"It's no surprise," a hedge fund manager who requested anonymity told United Press International Monday. "Stocks without bankruptcy court in their near future don't fall 99 percent."

Some Peregrine employees stated on Internet message boards that their company might bear some responsibility for its financial straits because it supposedly put major pressure on the sales force to make their quarterly quotas, the San Diego Union-Tribune said Monday. The pressure raised the temptation of some employees to fudge sales figures in order to protect their jobs.

'House of Cards'

"You're just building this house of cards that had to come down," stated David Mason, a sales training manager who was laid off in June.

Chapter 11 would allow Peregrine to maintain what's left of its workforce and get back on its feet using the proceeds of its sale of Remedy, $110 million of which would be provided by BMC in the form of immediate debtor-in-possession financing.

Peregrine Chairman John Moores, owner of the San Diego Padres baseball team, founded BMC in 1980.

BMC said its relationship with Moores was not a major factor in its decision to acquire Remedy, a "leading provider of service management software solutions" that BMC sees as complementary to its current line of customer service and IT service software.

"BMC is very well positioned to deliver what today's business leaders demand, an integrated IT and service process view for running their business," said BMC President Bob Beauchamp. "This acquisition is about fostering growth, and with the financial strength of BMC, customers can be assured that Remedy is better positioned now more than ever to continue to deliver value-added solutions to the market."

Copyright 2002 by United Press International.

All rights reserved.

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