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OCZ Technology, provider of high-performance solid state drives for both consumers and enterprise, has announced that Hercules Technology Growth Capital, Inc. has taken exclusive control of the company’s depository accounts at Silicon Valley Bank and Wells Fargo Bank, NA. As stated in OCZ’s recent SEC filings, OCZ and Hercules were parties to a loan and security agreement, the terms of which OCZ has not been able to maintain compliance with regarding certain covenants and operating ratios stipulated in the agreement. As a result, Hercules has directed the above-mentioned financial institutions to transfer funds in OCZ’s respective accounts to ones that are controlled by Hercules.
OCZ has stated that they have received an offer from Toshiba Corporation to utilize a bankruptcy proceeding to acquire substantially all of OCZ’s assets. Negotiations have reportedly been substantially completed, and OCZ is of the opinion that they have come to agreement on all material terms.
Numerous conditions must be met for the agreement to go forward: The value of the business must be preserved, including retaining employees, definitive documentation must be negotiated and executed, and bankruptcy petitions must be filed by the company and certain subsidiaries. The bankruptcy court also would need to accept Toshiba’s offer as being the best and highest offer under the circumstances after an auction process.
OCZ anticipates filing a bankruptcy petition shortly after the Toshiba and Hercules documentations are completed. More details should be released once the OCZ bankruptcy petition is officially filed. If the deal with Toshiba falls through, this would leave OCZ little choice but to then file a bankruptcy petition that would specify liquidation. Trading of shares of OCZ was suspended at 9:00 AM EST this morning, and resumed at approximately 2:30 PM EST this afternoon. Share were down almost 77% to only 15 cents / share as of time of this posting.
Many have predicted that there are too many players in the solid state storage arena, and being absorbed by a larger player such as Toshiba is not such a big surprise. Let’s hope that their products and technologies are able to soldier on under new ownership, rather than dropping by the wayside.