Halt Medical said yesterday that it’s reorganizing under a Chapter 11 bankruptcy, via an acquirer that’s floating a $4 million bridge loan to sustain the women’s health company’s operations during the sale process.

The company owes its top 20 creditors a total of nearly $1.3 million, including a $497,000 severance payment to former chief executive Jeffrey Cohen, according to documents filed with the U.S. Bankruptcy Court for Delaware. Halt Medical, which employs 17 workers, had assets valued at $2.2 million as of March 31 but liabilities of about $156.3 million, according to the filings. The company makes the Acessa radiofrequency ablation device, an ultrasound-guided therapy for removing uterine fibroids.

The problems at Halt began in earnest in January, when its main backer, private equity shop American Capital, was acquired by a larger PE player named Ares Capital.

“Shortly thereafter, American Capital informed Halt Medical that it would not provide [Halt Medical] with any additional financing,” Kim Bridges, who took over as CEO of the Brentwood, Calif.-based company in March 2016, said in an affidavit filed with the Delaware bankruptcy court.

Bridges then hit the fundraising trail, according to the affidavit, contacting roughly 40 investors including big-name venture capital shops and tapping investment bank Canaccord Genuity to solicit 87 potential buyers. Bridges told MassDevice.com yesterday that her search for financing to replace American Capital’s backing led to an inescapable conclusion: A Chapter 11 reorganization was the only way to keep the Acessa procedure alive.

“Ultimately, there were no practical alternatives other than a sale process carried out through Chapter 11, with a buyer who is committed to our mission and who has agreed to provide interim financing,” she told us during a telephone interview. “Subject to higher and better bids, the winning buyer will provide the capital to advance the Acessa procedure.”

The deal is slated to close during the 3rd quarter, Halt Medical said.

“We continue to have great resolve in our mission to advance minimally invasive, uterine-sparing technologies for the treatment of symptomatic fibroids,” she added in prepared remarks issued yesterday. “Moreover, we believe that the proposed relationship with Acessa Health and its affiliates, who have expressed deep support of our mission, is in the best long-term interest of our patients, partners, and stakeholders.

“The financial support we are receiving from Acessa Health and its affiliates during the sale process will allow us to continue normal operations during the transition period. We will do everything in our power to ensure that obligations to our employees, patients, and business partners are met and that we continue to deliver high quality service to our customers without interruption.”

An unrelated lawsuit, filed in the Delaware Chancery Court by a group of minority shareholders, alleges that American Capital, Cohen and his former management team executed a “squeeze-out merger” aimed at diluting the minority owners’ stake and increasing their own.

In February Halt logged a reimbursement win that extended coverage of Acessa under Medicaid to patients in Texas, Ohio, Michigan, Indiana and Washington, D.C.

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