The Deal: Overland Storage Gets Extension on Revolver

NEW YORK ( The Deal) -- Overland Storage ( OVRL) has extended the maturity date of its $8 million revolving credit facility into 2015 as it continues to evaluate a merger idea involving another data storage provider proposed by a distressed-debt fund manager.

With more time to access its revolver, the San Diego-based Overland Storage is getting ready to announce its fiscal 2013 fourth-quarter and full-year results on Sept. 4.

In May, the data protection and management company received a proposal from New York-based distressed-debt fund manager Cyrus Capital Partners to combine it with Tandberg Data (Holdings) Sarl, a Dortmund, Germany-based data storage and data protection company owned by Cyrus Capital that had $67 million in revenue in 2012.

Overland Storage has been evaluating the proposal with the help of financial adviser Al Longfield at Roth Capital Partners. Longfield declined to comment.

Meanwhile, Overland Storage received an extension on its $8 million revolving credit facility with Silicon Valley Bank to Aug. 7, 2015. The revolver had been set to come due on Aug. 8.

The Aug. 8 amendment to the revolver added a new $750,000 credit line for letters of credit, filings with the Securities and Exchange Commission said.

The company has $3.5 million outstanding on the revolver and a $4.2 million borrowing capacity. The debt is priced at prime plus 100 basis points to 125 basis points.

Overland Storage also has $13.25 million in 8% convertible promissory notes due Feb. 13, 2017. The notes are secured by 65% of the company's stock in each of its foreign subsidiaries, including Overland Storage (Europe) Ltd., Overland Storage Sarl and Overland Storage GmbH. The notes are convertible into the company's common stock at an initial conversion price of $1.30 per share.

Cyrus Capital's proposal is a "merger of equals" that would leave Overland's shareholders owning half of the company and Tandberg Data's shareholders owning half. In addition, Overland Storage's shareholders may receive cash for a portion of their shares in the company.

Cyrus Capital, which holds a portion of Overland Storage's promissory notes, sent a letter to the company laying out the potential synergies of a merger, including substantial cost efficiencies to facilitate profitability and cash generation; complementary channels and routes-to-market; and a common target market, similar business users, and complementary customer base, among other things.

Calls to Cyrus Capital weren't returned Friday.

While it remains to be seen what Overland Storage will report in its latest earnings next week, the company had assets of $38.4 million and liabilities of $44.79 million as of May 15.

Overland Storage has been the subject of various going-concern warnings from its accounting firm, Moss Adams, due to recurring losses and negative operating cash flows.

A provider of data protection appliances that help midrange businesses ensure their business-critical data are protected and readily available, Overland Storage has suffered from losses since fiscal 2006 and negative cash flows from operating activities since fiscal 2007, according to filings with the SEC.

According to the company's third-quarter report, Overland Storage reported a $14.22 million net loss for the nine months ended March 31. It has a $126.9 million accumulated deficit.

The company's stock, which trades on the Nasdaq under the symbol OVRL, closed up 2.51% at $1.23 on Friday.

With its stock at risk of being delisted for failure to comply with the Nasdaq, Overland Storage has appealed the delisting and the appeal is currently pending.

Calls to Overland Storage's spokeswoman weren't returned. The company's management couldn't be reached for comment.

Written by Jamie Mason

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