A123 Systems' Cell Family

It's Wanxiang or bankruptcy for A123 Systems as the companies sign agreement

Struggling battery maker A123 Systems has been unable to recover from the series of missteps beginning last Christmas, and running low on cash has turned to the largest autoparts maker in China for a rescue package.

A123 Systems and the Wanxiang Group of China signed definitive agreements today over Wanxiang's strategic investment in A123. The agreements cover a set of loans, senior convertible notes, and stock warrants, that if fully executed would total $465 million and leave Wanxiang with an 80% ownership stake in A123 Systems. Todays agreement follows the memorandum of understanding the companies signed last week.

The Wanxiang Group is the largest autoparts company in China, and already has a significant business in electric vehicle batteries. According to a presentation on the corporate home page, electric buses using Wanxiang batteries have been in operation since 2006 accumulating millions of miles of running experience, and electric vehicles and hybrid vehicles using Wanxiang drive train equipment are in operation in 22 cities in China.

The agreement is made up of three forms of financing, each of which are subject to approval from others.

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Comments

"According to the A123's quarterly filing released last week, the terms of the companies existing credit facility required that A123 maintain an unrestricted cash balance of at least $40.0 million. As of June 30, 2012 the company had $47.7 million of cash and cash equivalents and was burning through $18.0 million to $25.0 million per month and had expected to fall below the $40 million minimum by August 2012. If A123 cannot satisfy the conditions from Wanxiang, the quarterly filing warns that the agreement will fall apart and A123 is likely to have to go into bankruptcy." LOL You got an answer, isn´t obvious... "Initially Wanxiang will provide up to $75 million debt financing in a Senior Secured Bridge Facility. Of that, an initial credit extension of $25 million is expected this week"

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