In the second big battery maker bankruptcy of the year, A123 Systems, which makes rechargeable batteries for such automotive heavyweights as General Motors (NYSE: GM), filed for Chapter 11 bankruptcy protection this morning. The company follows in the footsteps of rival rechargeable battery maker Ener1, which similarly filed in February.
The recipient of $250 million in Department of Energy loans subsidizing renewable energy, A123 announced yesterday that it was unable to make a $2.8 million interest payment to its bondholders.
A123's filing may be more significant, however, and in multiple ways. For one thing, A123 received a $75 million loan from Chinese auto parts maker Wanxiang Group in August, part of a $465 million investment that now comes into question. The balance of this deal now appears to be dead, with A123 explaining: "We determined not to move forward with the previously announced Wanxiang agreement as a result of unanticipated and significant challenges to its completion." Still, it's safe to assume that Wanxiang will want to get its initial $75 million back -- or whatever's left of it.
Also having a stake in the troubled company are early financial backers General Electric (NYSE: GE) and ConocoPhillips (NYSE: COP). Meanwhile, rival battery maker Johnson Controls (NYSE: JCI) looks to be coming out furthest ahead. Johnson has agreed to acquire all of A123's automotive assets for $125 million, eliminating a rival and taking control of its technology (and its customer list) in one fell swoop. Johnson has promised to provide $72.5 million in "debtor-in-possession" financing to help keep A123 running through the bankruptcy process.
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