A123 Systems seeks OK to extend interim DIP loan, change lenders

By Jim Witters

Wilmington, Del., Oct. 29 - A123 Systems, Inc. is seeking approval to extend its interim debtor-in-possession financing facility until the court can approve a replacement lender for a $50 million single-draw term loan, according to documents filed Oct. 28 with the U.S. Bankruptcy Court for the District of Delaware.

At an Oct. 18 hearing, the court granted A123 interim access to $15.5 million of a $72.5 million DIP facility from Johnson Controls, Inc.

Wanxiang America Corp., the debtors' prepetition lender, agreed to the replacement DIP facility and use of cash collateral.

A123 hopes to draw the full $50 million upon interim approval of the Wanxiang DIP, the motion states.

"Proceeds of the Wanxiang DIP facility will be used to repay in full all outstanding amounts owed under the JCI DIP facility, with the remaining funds being used, along with cash collateral, to fund the debtors' ongoing operation of their businesses and these Chapter 11 cases," the company says.

A final hearing on the JCI DIP was scheduled for Oct. 30, but Hurricane Sandy's effect on the weather in Delaware prompted the A123 attorneys to seek a postponement to Nov. 5.

A123 filed a proposed supplemental interim DIP order that seeks to extend the JCI interim DIP until the replacement interim DIP can be considered.

Wanxiang, a China-based automotive parts manufacturer, also said at the Oct. 18 hearing that it hopes to become the stalking horse bidder for A123's assets. JCI has offered to buy the automotive business assets, with a purchase price of $116 million.

New DIP terms

The Wanxiang facility matures on the earliest of:

• 20 days after entry of the interim order;

• 30 days after the petition date unless the court has entered an order approving sale procedures for the transportation business;

• The date of the consummation of the sale of the transportation business;

• 60 days after the petition date if the auction has not commenced;

• 62 days after the petition date if the auction has not been completed;

• 65 days after the petition date if a sale order has not been entered by the court; or

• Dec. 31.

Interest is 12%. Default interest is 14%.

A123 is to pay an upfront fee of $1.25 million.

The exit fee is 0.5% of the amount of any portion of the loan repaid or prepaid.

At closing the company also will pay up to $250,000 of the borrower's prepetition legal fees.

"The Wanxiang DIP facility is not tied in any way to any stalking horse proposal or stalking horse agreement," the motion states.

A123 is a Waltham, Mass.-based company that designs, develops, manufactures and sells rechargeable lithium-ion batteries and battery systems, for bankruptcy on Oct. 16. Its Chapter 11 case number is 12-12859.

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