In collaboration with the stricken battery maker A123 Systems, Johnson Controls announced on 26 October that it had chosen not to be the debtor-in-possession (DIP) lender during A123’s bankruptcy process to avoid potential delays posed by threatened legal actions from A123’s former main investor and would-be acquirer Wanxiang Group. “The parties,” said JCI, “believe this move is in the best interest of the estate by ensuring an efficient process that will best preserve value for creditors, employees and customers.”
“We are concerned that back-and-forth posturing by other interested parties may lead to confusion and anxiety for A123’s employees and customers and thus destroy underlying value in the estate,” said Alex Molinaroli, President of Johnson Controls Power Solutions. “We have agreed to step aside as the DIP funder in order to keep the process moving and allow it to conclude in the most efficient manner possible. We want to reassure employees, customers and other stakeholders that Johnson Controls remains committed to our acquisition of A123, which will keep a source of critical jobs, intellectual property and advanced battery technology in the United States.”
Johnson Controls said it was maintaining its US$125m offer for A123’s automotive assets as well as the ‘stalking horse’ position in the bankruptcy process, subject to Bankruptcy Court approval, which is expected on 5 November. The company also plans to expand its offer to include A123’s government business, including military contracts, during the bankruptcy process.
“A123’s technology provides a combination of performance attributes that make it well suited for a range of applications, including certain automotive and military applications that are complementary to Johnson Controls’ existing portfolio,” said Molinaroli.
JCI’s change of tack forestalled potential legal challenges from Wanxiang Group and also from Fisker Automotive. JCI’s announcement came the same day as a request to the bankruptcy court in Delaware from A123’s OEM customer Fisker to delay the auction of A123’s assets by at least 30 days. “A hurried sale process will be damaging to the estates and deprive creditors of value that may be realised through higher and better offers,” said Gregg Galardi, an attorney for Fisker, in court papers filed on 26 October. Fisker also indicated, according to an Associated Press report carried by the Detroit News, that it would file an “emergency motion” challenging Johnson Controls’ approved debtor-in-possession lending to A123 Systems.
A123 Systems had just been given bankruptcy court approval to access US$15.5m of debtor-in-possession funding from Johnson Controls to maintain day-to-day operations pending the sale of its assets.
