A123 Wins OK to Seek Creditors’ Vote on Payment Plan

A123 Systems Inc., the bankrupt former electric-car battery maker, won court approval to seek votes from creditors on its repayment plan.

U.S. Bankruptcy Judge Kevin Carey approved A123’s disclosure statement, an outline of its liquidation plan used by creditors to decide whether to vote for or against the plan, according to court documents filed today in Wilmington, Delaware.

The company will seek court approval of the plan that distributes the proceeds from selling off substantially all of its assets at a hearing scheduled for April 30, court papers show.

A123 got court approval Dec. 11 to sell the majority of its assets to the U.S. unit of Wanxiang Group Co., China’s biggest auto-parts maker. Wanxiang America Corp. acquired substantially all of A123’s automotive, grid and commercial business assets for about $256.6 million. The deal received approval from the Committee on Foreign Investment in the U.S. on Jan. 29.

CFIUS, as it is known, is a federal interagency group led by the Treasury Department that reviewed the sale after members of Congress expressed national security concerns over allowing a foreign competitor to obtain the technology developed with government backing.

Congressional Anxiety

A123 and Wanxiang tried to mollify congressional anxiety by excluding the battery maker’s government business from the deal. It was was sold to Woodridge, Illinois-based Navitas Systems LLC for about $2.25 million.

The Waltham, Massachusetts-based company filed for bankruptcy in October after a previous deal with Wanxiang was scuttled amid congressional Republicans’ reluctance to allow its sale to a Chinese company. A123, which was awarded a federal grant of as much as $249.1 million and only used about $132 million to build two plants in Michigan, listed assets of $459.8 million and debt of $376 million as of Aug. 31 in court documents.

Under the plan, general unsecured creditors are projected to recover about 32.7 percent of what they’re owed, an amount which hasn’t yet been determined, as the former battery maker is in the process of objecting to certain of those claims, including alleged claims of about $140 million submitted by Fisker Automotive Inc., which was its main customer.

Supply Agreement

Fisker argued in an objection to the disclosure statement that it has a $91.2 million claim for damages resulting from the rejection of a supply agreement with A123 and a $48.7 million breach of warranty claim. The luxury plug-in hybrid carmaker said in the court papers that A123 should disclose how defective batteries supplied for the Karma sedan contributed to the bankruptcy filing.

If objections to claims are successful “then the estimated percentage recovery for general unsecured creditors would be 63.6 percent,” A123 said in the disclosure statement. Likewise, unsecured subordinated noteholders, with about $146.4 million in claims, would get a 62.9 percent recovery if the claims objections are accepted by the court, as opposed to the current estimate of a 31.3 percent recovery. Unsecured senior noteholders are expected to be paid in full.

The case is In re A123 Systems Inc., 12-12859, U.S. Bankruptcy Court, District of Delaware (Wilmington).