Bankruptcy Filing By Medical Device Company: Overshadowed By Corporate Intrigue

by San Antonio Attorney

Cardiac Science Corp, a medical device manufacturer, filed for Chapter 11 bankruptcy last Tuesday.

Cardiac Science is known for making automated external defibrillators. The company runs its manufacturing operation in Deerfield, located in the eastern Dane County. Sales and accounting are done from offices in Waukesha.

Cardiac Science was deemed to be one of the most feasible companies with approximately 200,000 automated defibrillators sold annually.

Singapore based DBS Bank Ltd, one of the company’s chief lenders, advanced more than $80 million and was secured by the entire company and its assets. DBS sold the loans last September 29 and unfortunate events began to occur in a series of cascades.

The debt was bought by an entity called CFS 915 LLC, also a part of the Aurora Capital Group, a Los Angeles based private equity firm specializing in investments of financially challenged mid-sized companies.

On the same day the debt was purchased, CFS filed a case against Cardiac Science and some of its employees.

CFS asserted its authority under the loan agreement, fired the board of directors and appointed new members instead. The old employees were ushered out of the offices and company resources were confiscated. CFS justified their actions on the basis that Cardiac Science had defaulted on its loan.

In an affidavit, Michael Kang, a turnaround specialist, stated that Cardiac Science now owes CFS about $87 million and they also owe $6.3 million to HDFC Bank Ltd based in Mumbai, India.

It seems that CFS is set to take over Cardiac Science. The debt holder already adhered with a purchase agreement with Cardiac Sciences. The offer may still be topped by another bidder in a supervised auction by court.

A preliminary hearing in the bankruptcy case will be scheduled next Friday.

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