SynCardia wins approval to hold bankruptcy auction

The assets of Tucson-based artificial heart maker SynCardia Systems will go on the bankruptcy auction block Sept. 14, after the company won court approval of the auction despite the objections of creditors and a case trustee.

Judge Mary F. Walrath of the U.S. Bankruptcy Court in Delaware signed the order approving the auction on Friday, finding that SynCardia “articulated good and sufficient business reasons” to approve the auction.

The judge did delay the process, after a committee of unsecured creditors and the U.S. Trustee in the Chapter 11 case complained that the auction timetable was too short.

SynCardia and its proposed buyer had proposed holding an auction Aug. 19 and a hearing to approve the winning bidder on Aug. 22, contending a quick sale was needed to keep SynCardia afloat.

Walrath ordered the auction to be conducted on Sept. 14 and the hearing to approve the sale to the highest bidder to be held on Sept. 16.

SynCardia, maker of the only FDA-approved artificial heart for use as a bridge to transplant, filed for Chapter 11 bankruptcy reorganization on July 1.

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SynCardia has proposed selling its assets to its major secured creditor, an affiliate of Versa Capital Management, for a credit bid of $19 million plus $150,000 cash, subject to higher offers in the bankruptcy auction.

The proposed buyer also is providing short-term debtor financing to help SynCardia survive through the bankruptcy case.

The unsecured creditors had sought to delay the auction, arguing that the short timeline SynCardia requested to approve the bankruptcy sale plan left too little time for the creditors to study the deal or reach some kind of settlement.

A bankruptcy trustee also had objected, contending that the auction time frame was too short to attract possibly higher bids and that the company’s proposed sale includes improper “breakup fees” and other compensation to the buyer.

On Friday, Judge Walrath also approved the breakup fee and assumption and assignment procedures for the auction.

Earlier in the week, the judge finalized interim orders on motions aimed at keeping SynCardia operating, approving continued use of its bank accounts and ordering utilities to be kept on with adequate payment assurances.