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.
Fool contributor Rich Smith has no positions in the stocks mentioned above. The Motley Fool owns shares of General Electric Company. Motley Fool newsletter services recommend General Motors Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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