Once you go below the Nexus and choose to put the old one to sleep, you kill King Allant and he does drop it. It appears on the side of the room you faced him in, but not as a regular item drop that looks like a soul. You must withdraw the sword from the ground much like you did with the demonbrant or storm ruler. Facing the fog you came through to face King Allant, it would be on your right.