A123 expects to be in default under material debt agreements today, the Waltham, Massachusetts-based company said yesterday in a regulatory filing. A123 didn’t expect to be on time with an interest payment due yesterday on $143.8 million of notes expiring in 2016, or to make a payment due yesterday on $2.76 million in outstanding 6 percent notes, according to the filing.
“The company may not have sufficient cash to fund operations and may need to seek the protections provided under the U.S. Bankruptcy Code,” A123 said. “No assurance can be given that the company will be able to avoid restructuring, reorganization, or a bankruptcy filing.”
A123, which received a $249.1 million federal grant in 2009 to build a U.S. factory, needed a financial lifeline after struggling with costs from a recall of batteries supplied to Fisker Automotive Inc., the plug-in hybrid luxury carmaker. A123 announced in August that it was working on a deal with Wanxiang Group Corp., China’s largest auto-parts maker, for financing in exchange for a majority ownership stake.
Three phone calls today to Mo Xiaoping, Wanxiang’s spokesman, went unanswered.
Wanxiang plans to invest as much as $465 million in A123, giving the Hangzhou, China-based company a stake of as much as 80 percent, A123 said in an Aug. 16 statement. In yesterday’s filing, A123 said it was considering strategic alternatives including “one or more potential transactions” to address its liquidity problems. There is “no assurance” that A123 will be able to find a way to continue to operate its business as a going concern, the company said.
The possibility of A123 filing for bankruptcy protection fuels further political debate over government financing of alternative-energy and transportation businesses. Federal grants and loans to companies including A123, Fisker and Tesla Motors Inc. (TSLA) have drawn scrutiny from congressional Republicans following the September 2011 bankruptcy filing of solar-panel maker Solyndra LLC two years after it received a $535 million loan guarantee from the U.S. Energy Department.
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