Tangled Web for Battery Maker A123 Systems Gets Even Tanglier

Lithium ion battery maker A123 Systems has gotten a lot of ink and hyperlinks this year – the Fisker Karma battery recalls caused by its A123 Systems battery failure, and the acquisition deal by Chinese auto parts maker Wanxiang Group, come to mind. More recently, A123 Systems filed for bankruptcy protection in October and major auto parts maker Johnson Controls Inc. (JCI) offered to become a debtor-in-possession lender during the bankruptcy process.

Now the plot thickens and the web gets tanglier, with lawyers setting the pace through complicated legal papers being filed. Fisker Automotive asked a bankruptcy judge to delay the auction of A123 Systems, stating that the hurried sale process would be damaging to creditors expecting to see higher and better offers. Fisker is filing an emergency motion challenging the debtor-in-possession loan and would like to see a 30-day-or-longer extension of the bidding process.

JCI just released a statement that it has chosen not to be debtor-in-possession lender during A123’s bankruptcy to avoid potential delays by threatened legal action from Wanxiang. A123 planned to sell its automotive-business assets to JCI in a deal valued at $125 million. The deal is subject to other potential offers in a bankruptcy auction. A123 recently stated that it has assets of $459.8 million and debt of $376 million. JCI is concerned that back-and-forth posturing would destroy underlying value in the estate. A123 is scheduled to return to court soon to seek approval of the remainder of a $72.5 million loan, and intends to file court papers seeking interim approval of a replacement debtor-in-possession facility from Wanxiang.

So, A123 Systems still has enough value to not have its plug completely pulled, and its shades drawn for good. It’s still in the market producing what’s considered to be advanced lithium-ion battery technology. In the end, companies of all types must be profitable and offer hope for investors to have long-term returns, or they will pull the plug and walk away. A123 Systems still has hope for survival. Perhaps this offers a symbol of opportunity for other lithium-ion battery makers to step up to the game and bring a wider selection of dependable, high quality batteries to electric vehicle makers?

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