A123 Systems seeks court approval for bid procedures, DIP financing

By Caroline Salls

Pittsburgh, Oct. 17 - A123 Systems, Inc. requested court approval of the bid procedures for the proposed sale of its automotive business to Johnson Controls, Inc., according to a Tuesday filing with the U.S. Bankruptcy Court for the District of Delaware.

According to an 8-K filed with the Securities and Exchange Commission, Johnson Controls agreed to pay $116 million for A123's automotive business assets, including all of its automotive technology, specified products and customer contracts, its facilities in Livonia, Mich., and Romulus, Mich., and its equity interest in joint venture Shanghai Advanced Traction Battery Systems Co. Ltd.

Additionally, the company granted Johnson Controls the option to acquire its cathode powder manufacturing facilities in China for an additional purchase price of $9 million.

Under the proposed bidding procedures, competing bids are due by 5 p.m. ET on Nov. 16. Competing bids must be for at least $10.25 million more than the stalking horse bid.

If Johnson Controls is not the winning bidder for the assets, A123 will pay it a $3.75 million break-up fee and reimburse specified sale-related expenses.

Bids at auction must be in minimum increments of $500,000.

The auction will be held on Nov. 19 and the sale hearing is scheduled for Nov. 26.

The company has requested an Oct. 30 bid procedures hearing.

DIP loan terms

A123 is also seeking court approval of a $72.5 million debtor-in-possession financing commitment from Johnson Controls.

According to the DIP loan motion, the proceeds of the financing will be used to enable A123 to continue operating its business and repay some liquidated obligations owed to its Wanxiang lender.

Interest on the DIP financing will be 15%.

The facility will mature on the earliest of 15 calendar days after the bankruptcy filing date unless a final order has entered a final DIP loan order and an order approving the bid procedures, the sale closing date, 34 days after the bankruptcy filing date if the auction has not begun by that date, 41 days after the filing date if the sale order has not been entered and Dec. 31.

The company is seeking interim access to $15.5 million of the DIP financing. The interim hearing is scheduled for Oct. 18.

Directors resign

In addition, A123 said in the 8-K that Jeffrey McCarthy resigned from the board of directors, effective Oct. 11, and Mark Little resigned from the board, effective Oct. 13.

Based in Waltham, Mass., A123 designs, develops, manufactures and sells rechargeable lithium-ion batteries and battery systems. The company filed for bankruptcy on Oct. 16 under Chapter 11 case number 12-12859.

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