Chinese Company Wanxiang Group to Finance A123's Bankruptcy ...

Last month, lithium-ion battery maker A123 Systems filed for Chapter 11 bankruptcy. Johnson Controls Inc, a fellow American battery maker, planned to buy A123's assets and provide bankruptcy financing. That plan was jeopardized, however, when Chinese auto parts supplier Wanxiang Group came forward, offering a better deal.

Now U.S. Bankruptcy Judge Kevin Carey has approved Wanxiang as the lender in the case, but the question of who gets A123's assets is still up in the air, Bloomberg reports. The problem is that A123 received a $249 million grant from the federal government. Several government agencies are concerned that the assets the government helped develop in order to boost the county's green energy industry could now end up in the hands of a foreign company.

A123 was one of several companies that received funding under the U.S. Energy Department's $90 billion green energy initiative. The demand for electric car batteries was too low, however, and the company was forced into bankruptcy. In a Chapter 11, the debtor company restructures in order to pay back its creditors. In doing so, companies often close off branches, merge, or sell their assets.

Johnson Controls Inc, another company that received government subsidies, was set to provide bankruptcy financing and buy A123's assets. However, Wanxiang swooped in at the last minute and offered a better financing deal. Johnson said it withdrew as the lender to avoid a fight over financing.

The financing situation has been settled, but the question of assets is still on the table. Both Johnson and Wanxiang intend to bid on the company's assets, including its patents, at auction.

However, the Committee on Foreign Investment in the U.S., a multiagency group led by the Treasury Department, has expressed its misgivings about an asset sale to Wanxiang. "A123 has received millions of taxpayer dollars to develop technology and intellectual property that should not simply be shipped to China," Senator John Thune said in a statement.

Wanxiang Group has asked for an extension of at least 30 days in the bid deadline. However, A123 has asked the court to deny Wanxiang's request, saying that even if the delay is granted, the company may not be able to secure the approval of CFIUS and other regulatory agencies.

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Source: http://atlantabankruptcynews.com/2012/11/chinese-company-wanxiang-group-to-finance-a123s-bankruptcy.html

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