Mountain View, Calif.-based SGI said it reached an agreement with all of its major debt holders that would reduce its debt by $250 million as part of the move.

Once a high-flying maker of servers, workstations and visualization systems, SGI has seen its business wane for several years. Most recently, the company was delisted from the New York Stock Exchange for trading below the minimum $1 per share. It now trades on the small-cap OTC Bulletin Board.

SGI said it expects to file its reorganization plan shortly and to emerge from Chapter 11 within six months.

"We want to assure our customers, our employees and our communities that SGI is operating business as usual," recently appointed SGI Chairman and CEO Dennis McKenna said in a statement.

He added: "This is a necessary and responsible step that will strengthen the company and foster a sustained turnaround at SGI. This milestone marks a fundamental and comprehensive change."