Silicon Gaming plans restructuring

Friday, July 23, 1999 | 11:31 a.m.

PALO ALTO, Calif. -- Shares of financially ailing slot maker Silicon Gaming Inc. plunged 37.5 percent Thursday after the company announced a restructuring plan that would slash the equity of current shareholders.

Current shareholders would wind up with 5 percent of the company under the proposal, and would be further diluted when creditors infuse additional capital into the business.

Silicon, maker of the Odyssey slot platform, said holders of its $47.25 million of senior discount notes had signed a nonbinding letter of intent agreeing to the proposal. The company announced three weeks ago it wouldn't make interest payments on the notes.

The plan calls for conversion of $39.75 million of the notes into preferred stock, itself convertible into up to 57 percent equity in a restructured company.

The remaining $7.5 million of debt would bear interest of 10 percent, down from the current 12.5 percent, and be payable in kind for the five years until maturity. Pay-in-kind debt allows a company to issue additional interest-bearing notes rather than make cash-payments as interest comes due.

Silicon said the deal "contemplates" the note holders will invest up to $5 million more in the company in the form of convertible senior secured notes. If the notes are converted, current equity holders would wind up with less than the 5 percent they'll get under the proposed restructuring.

Silicon said current employees of the company would receive 38 percent of its equity as "incentive compensation."

Silicon's stock closed Thursday at 31.25 cents a share, down 18.75 cents.

Silicon's high-tech Odyssey slots offer state-of-the-art graphics, but the high cost of the machines kept the company from making its sales projections.