Quantum is making progress financially and sales-wise with a debt for equity swap and Veeam tape library qualification.
The loss-making company has been through a boardroom refresh triggered by a company called Dialectic Capital Management buying up a substantial amount of its debt and gaining a board seat. The new board voted out chairman, president, and CEO Jamie Lerner in June, replacing him as CEO with Hugues Meyrath. There was a more or less complete C-level exec overhaul as Meyrath put his own team in place in pursuit of a company turnaround and growth strategy.
Sufficient progress has been made for Quantum and Dialectic to agree to the restructuring of the Dialectic-held Quantum debts. The Dialectic term debt of approximately $52 million is to be exchanged for senior secured convertible notes that have a three-year maturity. Dialectic has a warrant to purchase 2,653,308 shares of the company’s common stock as consideration. Capital raised to date through Quantum’s Standby Equity Purchase Agreement (SEPA) can be used to repay the existing term loan and an additional $15 million of SEPA proceeds to be retained by the company for working capital and general corporate purposes.
Meyrath stated: “This transaction to restructure a substantial portion of the Company’s outstanding term debt represents a significant step toward our goal of becoming debt-free. The proposed exchange of term debt for convertible notes demonstrates Dialectic’s belief in the Company’s strategic vision and long-term growth opportunities, while also aligning Dialectic as a future strategic partner. In addition, we believe this transaction provides increased financial flexibility to execute on our operating initiatives and revitalized go-to-market strategy.”
He added: ”We believe the increased financial flexibility provided by this transaction allows us to focus on our goal of delivering profitable performance and revenue growth.”
John Fichthorn, Managing Partner of Dialectic Capital Management and Quantum board member, said: “This transaction is an important milestone in Quantum’s ongoing operational and financial transformation. At Dialectic, we are committed to supporting the management in building a focused, profitable, and growing storage technology company with a clear strategy and strong alignment across all stakeholders. By restructuring the balance sheet and positioning Quantum for growth, our goal is to align the interests of management, employees, and shareholders through the performance of the equity.”
Quantum has also gained a product sales opportunity, as its Scalar i7 Raptor tape library has achieved Veeam Ready qualification from Veeam Software, the number-one data protection backup and cyber-resilience supplier. Quantum claims the Raptor has the highest storage density of any tape library on the market.
Quantum’s existing Veeam Ready systems include Scalar i3, Scalar i6, Scalar i6000 tape libraries, DXi backup appliances, and ActiveScale object storage. The Raptor can be paired with ActiveScale Cold Storage, offering Amazon S3 Glacier-compatible object storage for archiving.
Meyrath said: “By extending Veeam Ready qualification to our Scalar i7 Raptor, we’re delivering customers the broadest range of tested solutions – from disk and object storage to our entire line of tape libraries—so they can choose the right mix of performance, cost, and retention for their environment.”
The closing of certain transactions contemplated by the Transaction Agreement is subject to certain conditions, including the approval of the debt exchange by the company’s stockholders.
