The company had sought permission to take $20 million from shareholder Bzinfin SA, controlled by Ener1 director Boris Zingarevich. U.S. Bankruptcy Judge Martin Glenn in Manhattan today refused to approve all of Ener1’s request.
“You have not persuaded me you should get $20 million today when the budget you presented shows a maximum usage of $13.5 million,” Glenn said. The judge scheduled a Feb. 27 hearing to consider confirming Ener1’s reorganization plan.
An Ener1 unit received a $118 million U.S. Energy Department grant to make batteries for electric vehicles and hybrids, which run on both electricity and gasoline.
“The demand for EVs, however, did not develop as quickly as anticipated, which in turn harmed the debtor’s business, operating results, financial condition and prospects,” Alex Sorokin, the interim chief executive, said in court papers. He was named to the position in November.
The New York-based company filed for Chapter 11 protection listing assets of $73.9 million and debt of $90.5 million.
Ener1’s stock will be canceled and new shares will be given to Bzinfin and holders of long-term debt, under its plan.
Bzinfin, a holding and investment company based in Russia, owns about 49 percent of Ener1’s stock and is the largest shareholder, Michael J. Venditto, a lawyer for Ener1, said today in court. The stock was delisted by Nasdaq, he said.
Bzinfin is providing Ener1 with $81 million in total financing, which includes the debtor-in -possession, or DIP, loan to fund operations during Chapter 11 and the exit financing to complete the reorganization. In return, it will receive much of the equity in the company after it emerges from Chapter 11.
“I’m particularly sensitive to these issues where the DIP lender is going to essentially wind up owning the majority of the company,” Glenn said before giving interim approval to the loan.
Glenn noted that three lawsuits by shareholders seeking class-action status have been filed against the company in New York. He urged Ener1’s lawyers to be prepared to present evidence in case shareholders want to raise questions about the valuation of the company at the confirmation hearing.
The largest unsecured creditors listed are Liberty Harbor Special Investments LLC, with notes valued at $39.5 million managed by Goldman Sachs Group Inc., and Itochu Corp. (8001), with notes valued at $10.3 million. Itochu, based in Tokyo, is affiliated with Ener1 director Greg Kasagawa, according to court papers.
The case is In re Ener1, 12-10299, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
To contact the reporter on this story: Don Jeffrey in New York at email@example.com.