Silicon Gaming completes restructuring

Tuesday, Nov. 30, 1999 | 10:57 a.m.

THE ASSOCIATED PRESS

PALO ALTO, Calif. -- The price of Silicon Gaming Inc. stock jumped 50 percent today, though common shareholders will suffer a 95 percent dilution of their ownership stake in the slot maker under a new financial restructuring plan.

Silicon stock was quoted at 15 cents, up 5 cents a share, in early afternoon trading after the Palo Alto, Calif., company said it had agreed with holders of $47.25 million of discount notes to a new capitalization.

Silicon, maker of the Odyssey slot platform, has been struggling since its inception to gain market share for the high-tech machines. But their price, which was nearly double that of standard slots, kept the company from reaching its financial goals.

The restructuring calls for note holders to convert $39.75 million of their debt to preferred stock, itself convertible into 174.3 million common shares, or 57 percent of the equity in the revamped company.

The other $7.5 million of notes were converted into new debt at a lower interest rate and featuring pay-in-kind provisions. The note holders also agreed to invest up to $5 million more in the company, Silicon said.

Silicon allocated 38 percent of the new stock to current employees as incentive compensation, and reduced the percentage ownership of the company's current equity holders to 5 percent from 100 percent.

The company will offer current shareholders a change to exchange their stock for units consisting of one share of common and a warrant to buy 3.6 shares of stock at a premium to fair-market value.

Assuming full conversion of the warrants and preferred stock, the number of shares outstanding would increase to 450 million from about 20 million.

All Silicon directors except Andrew Pascal, president and chief executive officer, resigned as part of the restructuring and two new board members -- Robert Reis and Stanford Springel -- were appointed.