Silicon Graphics Inc., a developer of high-performance computer workstations, filed for Chapter 11 Bankruptcy protection on May 8. The Mountain View, Calif.-based company reached an agreement with its bank lenders and debt holders to reduce its debt by about $250 million.
"This is a necessary and responsible step that will strengthen the company and foster a sustained turnaround at SGI. This milestone marks a fundamental and comprehensive change," said SGI's recently appointed Chairman and CEO Dennis P. McKenna.
SGI said it will file a reorganization plan and expects to emerge from Chapter 11 within six months.
Meanwhile, McKenna said, " ... SGI is operating--business as usual."
Over the last 100 days, the company said it has assembled a new management team, including a new CEO and CFO; completed a program that has resulted in $100 million in annualized cost savings with an additional $50 million in savings underway; and implemented a plan to reposition its product and market focus to take advantage of the company's significant technology and market potential.
Upon confirmation of the reorganization plan, the new common stock of the company will be issued to the holders of SGI's Senior Secured bonds. The company said all of SGI's existing common stock and the unsecured subordinated debentures will be cancelled upon confirmation of the plan by the court and receive no recovery.
"We regret the effect that this will have on SGI's shareholders and other unsecured creditors," said McKenna.
SGI received interim approval from the court on May 10 to use the $70 million it received from a group of its bondholders. This credit facility will fund day-to-day business operations including employee salaries, benefits, supplier payments, and other operating expenses during the reorganization process.
The company said it intends to make timely payment for goods and services provided on or after the filing date in the normal course of business and in accordance with terms of existing supplier agreements.
The filings were made in the U.S. Bankruptcy Court for the Southern District of New York.
