creditors hold key to selling ventracor

Creditors hold key to selling Ventracor

CITY BEAT: Rebecca Urban | May 26, 2009
Article from: The Australian

ADMINISTRATORS to the failed medical device maker Ventracor are recommending creditors vote in favour of selling the company offshore for $US8million ($10.2 million), arguing that the deal offers greater certainty than a competing proposal put forward by shareholders.

A creditors' report released by Ferrier Hodgson yesterday confirmed that it had entered into a non-binding and non-exclusive heads of agreement with a US buyer and was in the process of negotiating a sale agreement.

According to the report, Siqro Inc has offered to buy the assets of the company, including intellectual property, plant and equipment, its heart pump inventory and supplier and distributor contracts, and has also assured continued employment for most employees.

While City Beat couldn't find any official reference to a company by that name, Siqro is Orqis spelt backwards -- the Californian medical device maker that has had representatives coming and going from Ventracor's Chatswood's headquarters for months now.

Orqis -- sorry, Siqro -- has been working hard to ensure it has enough money to not only buy the renowned cash-guzzler, but ensure it can fund its future operations, including seeking approval to market the VentrAssist heart pump in the US.

While the bidder has advised the administrator that it has $US28-US32 million in funding committed already, it might also need to seek a bridging loan to ensure Ventracor, which had just $2.8 million cash in the bank at March 19, doesn't run out of money in the meantime.

If the sale does proceed, creditors will receive all the money they are owed. However, there will be little -- maybe $1.8 million -- remaining for the investors who have plunged more than $200 million into the company over the years.

And in a further blow, an ambitious bid by the Ventracor Shareholders Group to buy back the company via a deed of company administration (DOCA) has been dismissed by Ferrier Hodgson.

"It is our opinion that the Shareholder DOCA has uncertainty and at present a number of outstanding practical issues, which casts general doubt over the projected outcomes," Ferrier's Steve Sherman wrote in his report.

While the shareholder group had indicated it had raised $12 million, principally from four cornerstone investors, the administrator was concerned about how it would fund the business after the sale.

Creditors will vote on the future of the former share-market darling at a meeting in Sydney on Friday."