Silicon Graphics files bankruptcy to complete $25 million asset sale

By Caroline Salls

Pittsburgh, April 1 - Silicon Graphics, Inc. filed for Chapter 11 bankruptcy Wednesday in the U.S. Bankruptcy Court for the Southern District of New York, and the company has agreed to sell substantially all of its assets to Rackable Systems, Inc. for $25 million in cash, according to a Rackable news release.

Rackable will also assume liabilities associated with the assets being sold.

"The combined company will be positioned to solve the most demanding business and technology challenges our customers confront today," Rackable president and chief executive officer Mark J. Barrenechea said in the release.

"In addition, this combination gives us the potential for significant operational synergies, a strong balance sheet, and positions the combined company for long-term growth and profitability."

Completion of the sale is subject to a number of closing conditions, including the approval of the bankruptcy court. The sale is expected to close within 60 days.

According to the bid procedures motion, Rackable will receive a $1 million break-up fee and an up to $1 million expense reimbursement if it is not the high bidder for the assets.

Competing bids are due by 5 p.m. ET on April 27 and must include a $2 million deposit.

Initial overbids must be for at least $27 million.

The auction will be held April 28, and bidding at the auction must be made in increments of at least $250,000.

The company has requested access to cash collateral to fund payroll and other direct operating expenses and to facilitate the sale.

The cash collateral use will expire on May 15 or earlier if the bankruptcy case is converted or a trustee is appointed to oversee the company.

Silicon Graphics listed $390.46 million in total assets and $526.55 million in total debt.

The company's largest unsecured creditors include Voltaire Inc. of Billerica, Mass., with a $1.86 million trade debt claim and Intel Americas Inc., based in Santa Clara, Calif., with a $1.71 million trade debt claim.

Silicon Graphics is a Sunnyvale, Calif.-based provider of products and services for use in high-performance computing and data management. Its Chapter 11 case number is 09-11701.

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