A123 Gets Bankruptcy Loan from Chinese Suitor

A123 Systems Inc., which makes lithium-ion batteries for hybrid and electric vehicles, has received bankruptcy court approval to accept $50 million of debtor-in-possession financing from China's Wanxiang Group Corp.

The new lower-interest-rate loan replaces $73 million in DIP financing that Johnson Controls Inc. provided when A123 filed for Chapter 11 in mid-October.

Wanxiang and JCI are vying to buy A123's assets. The Hangzhou-based conglomerate agreed in August to buy 80% of the battery maker for as much as $465 million.

That deal unraveled, reportedly because a federal watchdog group opposed the sale to a Chinese company. A123, which received $133 million of a Dept. of Energy grant, has sensitive contracts with the U.S. military.

A123 entered bankruptcy with JCI's offer to buy $125 million for its automotive battery business. JCI has said it may expand its bid to include A123 military business. But Wanxiang says it wants to be the lead bidder at an auction of A123's assets.

The two parties are arguing about how soon that auction should be held. The bankruptcy judge scheduled another hearing for Thursday.