A123 Systems Inc., the U.S. electric-car battery maker that filed for bankruptcy this week, won court approval to borrow as much as $15.5 million from Johnson Controls Inc. while it prepares to sell its assets.
U.S. Bankruptcy Judge Kevin Carey approved the interim financing at a hearing today in Wilmington, Delaware, after Johnson Controls cut the interest rate to 13.5 percent from 15 percent following talks held during a break. A123 is scheduled to return to court Oct. 30 to seek approval of the remainder of the $72.5 million loan.
A123, the recipient of a $249 million federal grant, said it would sell its automotive-business assets to Milwaukee-based Johnson Controls in a deal valued at $125 million. A123, based in Waltham, Massachusetts, listed assets of $459.8 million and debt of $376 million as of Aug. 31 in Chapter 11 documents.
The company said 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. Wanxiang had planned 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.
A123 said it decided to scrap the previous agreement with Wanxiang as it filed for bankruptcy protection. Wanxiang “was extremely interested” in providing the so-called debtor-in-possession loan, leading to a “spirited round of discussions,” D.J. Baker, an attorney for A123, told Carey.
“We have presented a very competitive bid proposal that is superior to the one that Johnson Controls has proposed,” Bojan Guzina, a Wanxiang attorney, told the court.
A123 decided to accept the loan from Johnson Controls after the auto-parts maker offered new terms, including the reduced interest rate, the ability for A123 to seek financing from any source and an agreement to waive all upfront fees upon refinancing.
The case is In re A123 Systems Inc., 12-49658, U.S. Bankruptcy Court, District of Delaware (Wilmington).