Silicon Graphics announces new exchange for 5.25% convertibles

New York, Nov. 4 - Silicon Graphics Inc. announced a new exchange offer for its 5.25% senior convertible notes due September 2004.

This time the Mountain View, Calif. company is offering either new 11.75% senior secured notes due June 2009 or new 6.5% senior secured convertible notes due 2009. The convertibles will have a conversion price of $1.25 per share.

In either case, Silicon Graphics will exchange its existing convertibles for the same principal amount of new securities.

The company said that the exchange is intended to offer holders of the existing notes an increase in yield, the benefits of a security interest and, in the case of the new convertibles, a lower conversion price in return for a "significant" extension in the maturity of the notes.

Silicon Graphics currently has $230 million of the 5.25% convertibles outstanding.

The company on Aug. 4 pulled its previous exchange offer after failing to achieve sufficient participation despite revising the terms. Holders of 71% of the existing convertibles tendered their securities, less than the 85% threshold set to complete the exchange.

The revised terms of the earlier offer were similar to the offer announced Tuesday except that the new instruments were senior rather than senior secured and the conversion price for the convertibles was higher in the earlier offer. In addition the earlier exchange limited the number of convertibles that could have been issued.

Previously Silicon Graphics was offering either new 6½% senior convertible notes due 2009 or new 11¾% senior notes due 2009 for the existing 5¼% convertibles. The new convertibles would have converted at $1.85 per share. Silicon Graphics would have issued up to $78 million of them.

The new exchange is subject to various conditions including that holders of at least 80% of the existing convertibles tender their securities and that shareholders approve issuance of the stock that would be issued on conversion of the new 6.5% convertibles.

Silicon Graphics said it expects to complete the exchange shortly after its annual shareholders meeting on Dec. 16. No formal deadline for the transaction was set as the company has yet to file the relevant documents with the Securities and Exchange Commission.

As an example of the impact of the exchange, Silicon Graphics said that if 80% of the existing convertibles are exchanged for the new convertibles, then they will convert into 147 million shares compared to the current 210 million shares outstanding.

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