Silicon Graphics gets court OK for reorganization plan, exit financing; expects to emerge in October

By Jennifer Lanning Drey

Eugene, Ore., Sept. 19 - Silicon Graphics, Inc. obtained court approval for its plan of reorganization and to enter into a commitment letter with Morgan Stanley Senior Funding, Inc. and General Electric Capital Corp. for $115 million in exit financing, according to Tuesday filings with the U.S. Bankruptcy Court for the Southern District of New York.

The company expects to emerge from bankruptcy in October, according to a company news release.

"As we emerge, the recapitalization of our company will be complete. We have eliminated the legacy debt, improved our liquidity and stabilized the business. We have also taken out significant costs-$150 million on an annualized basis," said Dennis P. McKenna, chief executive officer of Silicon Graphics, in the release.

The company's exit facility includes a $30 million revolving credit facility from General Electric Capital and an $85 million term loan B from Morgan Stanley.

The revolver will include an up to $30 million letter-of-credit subfacility.

The exit financing term will be 60 months.

As previously reported, Silicon Graphics said the exit facility will be used to repay the company's debtor-in-possession facility, to fund plan of reorganization payments and to meet working capital and other corporate needs.

Under the company's approved plan of reorganization, 2.5 million shares of new common stock will be issued.

Creditor treatment

Also under the company's plan of reorganization:

• Holders of the company's 6½% secured notes and 11¾% secured notes will receive their share of 2.5 million shares of new common stock in the reorganized company as well as 6.8 million rights to purchase one share of additional stock. This will represent 100% of the new common stock in the reorganized company.

The noteholders will also receive 100% of the beneficial interests of a trust funded by price-fixing litigation proceeds and $250,000 in cash contributed by the company;

• Holders of general unsecured claims will receive their share of $9 million;

• Holders of Cray unsecured debentures will receive 558,024 shares of new common stock. Lampe Conway will receive 141,976 shares of the new common stock on account of its exercise of the Lampe Conway rights offering option, unless rescinded by Silicon Graphics within one day of the confirmation date.

• Holders of old Silicon Graphics equity interests will receive no distribution.

Post-bankruptcy financing claims, priority tax claims, secured tax claims and other priority claims will be paid in full.

Silicon Graphics, a Mountain View, Calif., technology provider, filed for bankruptcy on May 29. The company's Chapter 11 case number is 06-10977.

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