the heaven blade got return to grendan. pretty sure he can get back his psyharden katana though.
btw here my thought on why he need to fuse both the heaven blade and psyharden katana.
The heaven blade from what we are shown can withstand a vast amount of kei (since heaven blade receiver all got monsterous amount of kei) unlike any normal dite (layfon normal weapon got burnt out too many times in this series already). So the heaven blade will allow Layfon to use all his kei without the weapon getting busted up.
Also might explain why the heaven blade can block and reflect savaris attack?
And the psyharden katana, well not sure if it got special ability but it is a katana and not a sword (like layfon normal dite and the heaven blade). Layfon is train in the psyharden skill which uses katana, so using a katana will allow Layfon to use his skills fully.
Now fusing both heaven blade and psyharden katana, create a heaven blade katana form. Which both allow Layfon to use all his kei and psyharden skill to its fullest.
Well that what i think happened anyway