Following a huge reorganisation designed 'to strengthen the company and resolve financial challenges', Silicon Graphics Inc's US operation has filed for Chapter 11 bankruptcy protection.
SGI says it has reached an agreement with all of its Senior Secured bank lenders and with holders of a significant amount of its Senior Secured debt on the terms of the reorganisation. The goal is to reduce its debt by approximately $250 million, and thus greatly simplifying its capital structure not to mention its overdraft payments.
As part of the agreement, Silicon Graphics and its US subsidiaries have filed voluntary petitions under Chapter 11 of the US Bankruptcy Code. SGI's non-U.S. subsidiaries are not included in the filing and will continue their business operations without court supervision. In court papers, SGI said it had been challenged by delays in introducing new technology, a focus on more specialised markets and more intense competition from larger rivals.
The company is keen to stress that it remains business as usual. It has received a commitment for a $70 million financing facility, which together with cash generated from operations, it hopes will fund its forward operating expenses including post-petition supplier obligations and employee salaries and benefits. "We expect to emerge from Chapter 11 reorganisation within the next six months," said a statement.