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The Deal: OCZ's Going Nowhere Fast

Still, Nowinski says, OCZ has technology that could be useful, not only to a Western Digital and SanDisk, but also to Seagate Technology (STX), or even to Micron Technology (MU) or Intel (INTC). A tech-focused private equity company like Silver Lake could also be interested, although those deals would usually be for less than a strategic.

And then there's the biggest company in the SSD space, Intel (INTC), which in April picked up NexGen Storage from its private equity backers for about $119 million. Executives there could also be interested in another purchase.

OCZ did not return several calls seeking comment.

Talk of possible buyers also raises the issue of valuation and the difficulty of fixing a price for a company whose financials aren't on the table.

Yet even in OCZ's beleaguered state, Knapp, the outgoing CFO, managed to arrange a financing deal of up to $25 million, consisting of a $15 million term loan and a $10 million revolving credit agreement, with Hercules Technology Growth Capital (HTGC) after Wells Fargo (WFC) reduced its credit line in January citing technical covenant defaults.

The original loan agreement, which was amended in June because OCZ still hadn't filed its financials, carried a stiff floating rate of the greater of 12.5% or prime plus 8.75%, although OCZ bought itself six months of interest-only payments. The agreement provides that the interest rate would be reduced after the first year if there were no defaults to the greater of 10% or prime plus 6.25%. There is also a payment in kind interest rate of 3% attached to the facility.

Hercules Technology, which increased its stake in the company with the June amendment to about 1.3 million shares via warrants exercisable at $1.46 per share, said it didn't comment on portfolio companies.

But, as a source pointed out, to get Hercules Technology to advance, and then amend, a credit line meant that it had to have seen something about the company's prospects it liked.

"Somebody's got faith in them," Handy says, "I would have expected them to be down to the penny stock level by now."

Based on that assessment, Handy says, he has a $500 position in the company.

Written by Paula Schaap.

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