Bankruptcy Court Clears Loan to A123

A123 Systems Inc. won interim approval from a federal bankruptcy judge to borrow as much as $15.5 million from Johnson Controls Inc.

The loan could be the first installment of the $73 million of debtor-in-possession financing JCI has offered to the maker of lithium-ion batteries, which filed for Chapter 11 earlier this week.

The loan is part of an agreement under which JCI would buy A123's automotive battery business for $125 million. Any asset sale is subject to approval by bankruptcy court.

Wanxiang Group Corp., a rival suitor for A123, challenged the JCI loan a hearing on Thursday. The Chinese company told the judge at that it has offered the battery maker DIP financing at a lower interest rate.

A123 chose the JCI loan after that company lowered its interest rate to 13.5% from 15%. The battery maker says it will continue to shop for better financing terms.