SGI emerges from Chapter 11

Silicon Graphics Inc. announced that it has officially emerged from Chapter 11, reorganized as a new company, less than six months after filing for bankruptcy protection. The new SGI is the result of a massive overhaul of the company’s global operations, according to a company statement.

“Today, we debut the new SGI, an efficient and fully recapitalized company armed with a new market-centric business model and empowered by a rekindled commitment to solving the problems of customers in a targeted range of markets,” said Dennis McKenna, the company’s chief executive officer, in the statement.

According to the statement, SGI has:

• Re-engineered the company's business model around customer needs.
• Strengthened its product and solutions.
• Installed a new management team.
• Installed a new board of directors.
• Achieved annualized cost savings of $150 million.
• Recapitalized the company, eliminating long-term debt and arming it with $115 million in exit financing and a balanced operating budget.

There is still considerable work ahead in implementing the growth initiatives, but “without doubt, this is a new day for SGI,” he added.

Under the reorganization plan, SGI, based in Mountain View, Calif., would emerge as a public company with a new credit facility. Its total debt has been reduced from $345 million to $70 million. The company's notes and debentures would be extinguished in exchange for the new common stock and cash, respectively, and rights to invest $50 million in additional shares of the reorganized company.

SGI unveiled a new board of directors that now includes Eugene Davis, chairman and CEO of Pirinate Consulting Group; Anthony Grillo, founder and CEO of American Securities Advisors; Kevin Katari, managing member of Watershed Asset Management; and Chun Won Yi, associate of Quadrangle Group. Continuing on the board are McKenna and James McDivitt, a former astronaut and retired senior vice president of government operations at Rockwell International.

SGI is also introducing new competitive server, storage and services solutions designed to accommodate existing customer processes while helping organizations manage data that is doubling in volume every nine to 12 months, the statement reads.

SGI also announced its exit financing facility with Morgan Stanley Senior Funding and General Electric Capital as lending agents. The new facility provides $115 million in financing consisting of an $85 million term loan and a $30 million revolving line of credit.

The expansive SGI product line enables the company, for the first time, to meet as much as 80 percent of a customer’s total information technology needs, McKenna said. “At the same time, SGI has refined its focus to deliver ‘innovation for results’ to its traditional high-performance computing customers in the defense and intelligence, sciences, and engineering analysis markets, as well as expanding into new defined areas within enterprise data management,” he added.

“SGI is known for providing technological leadership and innovation in the high-end server and cluster market,” said Gerry Kolosvary, president of FedCentric, an SGI government reseller. “With SGI's improved financial structure and a strong portfolio of Altix Itanium- and Xeon-based products and storage systems, we see a larger opportunity to address the challenges within data growth in government sectors.”