By Tom Hals
Mon Dec 29, 2014 4:40pm EST
Dec 29 (Reuters) - Bankrupt cancer vaccine maker Dendreon Corp will move ahead with a court-supervised auction of the company without a customary initial bidder, known as a stalking horse, the company's attorney said on Monday.
Dendreon filed for Chapter 11 bankruptcy in November after its vaccine fell short of expectations, leaving the company unable to service debt taken on to ramp up manufacturing of its key drug, Provenge.
The company had said it planned to identify a stalking horse bidder by Monday and hold an auction on Feb. 3 for bidders who qualify by the end of January.
A stalking horse bidder often helps draw others to an auction of a company by setting a floor price, but they also require the bankrupt company to commit to paying break-up and other fees if the stalking horse is outbid.
Multiple potential bidders were interested in Dendreon, but the company's advisers decided they did not want to tie up millions of dollars in a break-up fee, said Ken Ziman, an attorney for Skadden, Arps, Slate, Meagher & Flom who represents Dendreon.
He said the company would disclose its decision in a securities filing later on Monday.
While Dendreon does not have a stalking horse, it does have a $275 million minimum bid requirement as part of a deal with holders of its notes. If it does not receive a bid at that price, the noteholders will convert their debt into equity of the company when it emerges from bankruptcy.
Unless the company sells for enough to repay its $620 million in notes and other creditors, shareholders are unlikely to receive anything from the bankruptcy.
The company said in court documents that more than 40 parties had signed nondisclosure agreements, indicating interest in bidding on the company's assets.
If the company does not hold an auction, Dendreon will emerge from bankruptcy under the control of noteholders. Those investors include funds associated with Deerfield Management Co, Aristeia Capital, Empyrean Capital Partners, Wolverine Asset Management and Partner Fund Management. (Reporting by Tom Hals in Wilmington, Delaware; editing by Andrew Hay)
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