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Proposed Tintri-DDN storage deal heads for bankruptcy court

Data Direct Networks Inc. (DDN) is seeking a bargain from Tintri’s fire sale.

The DDN storage portfolio is poised to add the storage assets of failing hybrid vendor Tintri, which filed for Chapter 11 protection this week. The two vendors on Tuesday said they have signed a nonbinding letter of intent, with the transaction to be administered by a U.S. bankruptcy court in Delaware.

Proposed financial terms were not disclosed. However, a Tintri-DDN storage transaction is far from guaranteed. DDN’s offer is subject to several contingencies, including a court-sanctioned bidding process and final court approval. Should a deal be finalized, Tintri stockholders are not expected to receive a return on their shares.

However, Tintri employees waiting for back wages could be in luck thanks to new interim financing from TriplePoint Capital, one of the vendor’s principal debt-holders.

According to a securities filing, Tintri is seeking court approval to obtain debtor-in-possession financing to advance a possible acquisition. TriplePoint Capital has offered to lend $5.5 million of working capital and allow Tintri to roll up $25 million in TriplePoint debt, which DDN (or other potential bidders) presumably would take on as a condition of any deal.

The TriplePoint debt would be subordinated to that of Silicon Valley Bank, which negotiated a $12.5 million credit facility with Tintri earlier this year.  TriplePoint would require Tintri to establish a $1.9 million payroll reserve fund for back pay, benefits, withholdings and commissions owed to employees and contractors.

For Tintri, the bankruptcy filing marks the latest sad chapter in its slow demise. Perhaps handing its storage off to DDN can help burnish the technology, which has a strong installed base that includes about two dozen Fortune companies.

Tintri went public in a $60 million initial public offering on June 30, 2017. But investors were lukewarm on the shares from the start. After hitting a high of $7.75 – well off the company’s initial $11-per-share IPO target – the price has been in freefall ever since.

Nasdaq last month sent a delisting notice to Tintri after TNTR traded at less than $1 for more than 30 consecutive sessions. The equity remained in penny-stock territory on Tuesday, closing at 17 cents a share, with the DDN announcement pushing trading volume to 14.3 million shares.

Tintri’s struggles were mostly due to execution, said Eric Burgener, a research vice president at Framingham, Mass.-based IT analyst firm IDC.

“The Tintri array technology is specifically architected for running in a virtualized environment with a high IOPS profile. Tintri gave you that level of performance out of the box. Their challenges as a company were more along the go-to-market side, not their storage technology,” Burgener said.

DDN storage gear fills a niche in the high-performance computing market. Tintri will add real-time data analytics, virtualization and VM automation to DDN scale-out storage, making it particularly useful with the rapid emergence of AI-driven workloads across many industry sectors. DDN executives did not immediately respond to requests for additional comment.

Tintri products include the hybrid VMstore virtualization platform and flagship EC8000 Series all-flash cloud arrays. This marks the second DDN storage addition in less than two weeks, following its acquisition of the Lustre parallel file system from Intel in June.