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Imperium Secures Assets of Bankrupt Entelos with $1.95M Credit Bid


By Uduak Grace Thomas

Bankrupt biosimulations firm Entelos has sold its assets to secured lender Imperium Master Fund, which placed a credit bid of $1.95 million that beat the highest bid from rival informatics firm Simulations Plus.

Simulations disclosed last week that it had made a bid for Entelos, which filed for Chapter 11 bankruptcy protection in July. The asset auction was held on Sept. 21 and a hearing on whether to approve the sale was held last Friday (BI 9/23/2011).

According to documents filed with the US Bankruptcy Court for the District of Delaware this week, the court authorized the sale of all of Entelos' assets to Imperium, the company's primary creditor.

Entelos owes Imperium more than $8.4 million in secured debt plus interest and fees. Prior to the sale, the lender held around 6 percent of Entelos Class A common stock and 100 percent of the company's Series A preferred stock.

As part of the terms of the sale, Imperium has agreed to provide Entelos with up to $1.7 million to provide "adequate working capital and to cover any administrative obligations incurred during the course of the Chapter 11 cases."

Too Steep a Price

According to documents filed with the US Securities and Exchange Commission, Simulations Plus bid $1.75 million for the Entelos assets but later agreed to increase the purchase price to $1.85 million if its bid was selected during the auction.

"Although we believed we would be able to secure the bid at a price Simulations Plus could afford, it became clear at the auction … that we would have had to far exceed any amount the board of directors had approved as our maximum bid,” Walt Woltosz, chairman and CEO of Simulations Plus, said in a statement.

He added that his firm isn’t “prepared to risk substantially all of our cash to complete this acquisition."

Speaking with BioInform this week, Woltosz said that “it was made very clear even before the bidding started … that the secured debtor Imperium was prepared to go all the way up to the maximum of their credit bid.”

That meant the Imperium could have bid up to the total value of the $8.4 million in debt and “they intended to do that,” Woltosz explained.

“We put in one bid much lower than that and we said it’s a fruitless exercise for us to keep bidding,” he said. “They could keep bidding without putting up any cash and we would have to put up that cash.”

Previously, Imperium “[owned] two thirds of the company,” but during the course of the bankruptcy process “they were able to cancel all of the debts that Entelos had other than their own and they now own 100 percent of the company [including] all of the intellectual property,” Woltosz said.

He also said that the Imperium appears to be planning to invest funds into Entelos in order to rebuild it with Shawn O’ Connor, who is currently serving as the interim CEO, at the helm.

It does not appear that they plan to sell the business to a third party at present, he said.

Entelos officials could not be reached to confirm or deny these statements by press time.

Have topics you'd like to see covered in BioInform? Contact the editor at uthomas [at] genomeweb [.] com