Quantum Corp secures new $25M loan, amends existing agreements

Quantum (NASDAQ:) Corporation, a leader in computer storage devices, has entered into a new financial arrangement and made significant amendments to existing credit agreements, according to a recent SEC filing. On Monday, the company secured a delayed draw term loan facility of $25 million, maturing on August 5, 2026. This move is accompanied by changes to the interest rates and covenants of the company’s initial term loans and revolving credit agreement.

The new loan facility, provided by Blue Torch Finance LLC, will start amortizing at 5% per annum beginning September 30, 2025. Interest rates for this facility are set at 12% per annum for SOFR Loans and 11% for ABR Loans until March 31, 2025, with a portion of the interest being paid-in-kind. After this date, the rates will increase, with a higher percentage of the interest paid-in-kind.

Concurrently, Quantum Corp has amended its initial term loans, adjusting the interest rate margins and introducing step-downs based on the company’s cash proceeds from specific capital raises. The amendments also defer the commencement of amortization on these loans until September 30, 2025.

Moreover, the company’s revolving credit agreement with PNC Bank, National Association has been modified to adjust the interest rate margins on the revolving loans and the unused line fee. The maximum total net leverage ratio covenant will not be tested until June 30, 2025, with new minimum EBITDA covenants set for December 31, 2024, and March 31, 2025.

In connection with these financial restructuring efforts, Quantum Corporation also issued warrants to purchase over 7.6 million shares of its common stock to term loan lenders at an exercise price of $0.31 per share. The company further agreed to adjust the exercise price of certain outstanding warrants held by term loan lenders or their affiliates to the same price.

In a related development, Kenneth P. Gianella, currently serving as Quantum’s Chief Financial Officer, has been appointed as the Chief Operating Officer effective Tuesday. This appointment aligns with the terms of the Term Loan Amendment.

These strategic financial moves, detailed in the SEC filing, are part of Quantum Corporation’s efforts to strengthen its financial position and ensure long-term growth. The information is based on a press release statement.

In other recent news, Quantum Corporation has amended its existing credit agreements and issued warrants for stock purchase, as per a recent SEC filing. The company has adjusted its Term Loan Credit Agreement and enacted a Revolver Amendment to its Revolving Credit and Security Agreement, both allowing for postponed deadlines and necessitating certain fees and expenses.

Alongside these amendments, Quantum Corp issued warrants to term loan lenders for the purchase of up to 1,000,000 shares of common stock.

In the company’s latest financial results, Quantum reported a decline in revenue of 26% for fiscal year 2024, with earnings amounting to $311.6 million. Despite this, the company saw an improvement in its gross margin, reaching 40%. Quantum is currently restating its financial statements for fiscal years 2022 and 2023 due to changes in accounting methodology.

Quantum has sold service inventory assets and is focusing on reducing debt over the next 12 months. Looking forward, the company forecasts revenue of approximately $72 million for Q1 fiscal 2025 and expects flat revenue of approximately $310 million for FY 2025. As part of its business transformation initiatives, Quantum’s focus is shifting towards subscription-based solutions.

InvestingPro Insights

Quantum Corporation’s recent financial restructuring has caught the attention of market watchers, and real-time data from InvestingPro provides a deeper understanding of the company’s current situation. Notably, InvestingPro Tips indicate that Quantum Corporation is quickly burning through cash and that the stock has been subject to high price volatility. This suggests that the company’s efforts to secure new financing and amend existing credit agreements may be in response to these financial pressures.

Moreover, the stock trades at a low revenue valuation multiple, which could be seen as an opportunity for investors looking for potentially undervalued stocks or as a sign of market skepticism about the company’s future performance.

The data shows that Quantum Corporation has been unprofitable over the last twelve months and analysts do not anticipate the company will be profitable this year. This aligns with the company’s need to adjust financial covenants and secure additional capital.

It is also worth noting that the company’s short-term obligations exceed its liquid assets, which may have contributed to the decision to issue warrants as part of the new financial arrangement. These insights underscore the importance of the company’s strategic financial moves to ensure stability and potential growth.

For investors interested in Quantum Corporation’s stock, there are 15 additional InvestingPro Tips available, which provide a comprehensive analysis of the company’s financial health and stock performance. Visit https://www.investing.com/pro/QMCO for more detailed insights and to make informed investment decisions.

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