Lithium-ion automotive battery maker Ener1 Incorporated has been granted an interim court approval to borrow $13.5 million in reorganization funding.
In a decision this past Friday, U.S. Bankruptcy Court of the Southern District of New York judge Martin Glenn denied the company’s request to accept $20 million from shareholder Bzinfin SA which is controlled by its director Boris Zingarevich.
Explaining his decision, Judge Glenn said, “You have not persuaded me you should get $20 million today when the budget you presented shows a maximum usage of $13.5 million.” He has also scheduled a February 27 hearing to consider whether or not to confirm the company’s reorganization plan.
In court papers, Ener1’s interim CEO Alex Sorokin stated that consumer demand for electric vehicles has not developed as quickly as the company had anticipated and that this had “harmed the debtor’s business, operating results, financial condition and prospects.”
In 2010, Ener1 was awarded $118.5 million in grants from the U.S. Energy Department to expand their production of electric batteries for all-electric and plug-in hybrid vehicles. According to the Obama administration, the funds allowed Ener1 to add 120 workers to its Indianapolis manufacturing plant.
In its Chapter 11 bankruptcy protection filing, Ener1 listed assets amounting to $73.9 million and debt totaling $90.5 million.
Under the plan, the Russia-based holding and investment firm Bzinfin, along with holder of long-term debt will be awarded new stock shares and the company’s existing stocks will be canceled.
Bzinfin is currently Ener1’s largest stockholder with about a 49 percent stake in the company. Ener1 attorney Michael J. Venditto said the company’s sotck has been delisted by Nasdaq.
In return for providing Ener1 with $81 million, including debtor-in-possession or DIP operating funds and exit financing, Bzinfin will take control of a large portion of the company’s equity once it emerges from bankruptcy.
Prior to granting interim approval for the funding, Judge Glenn said, “I’m particularly sensitive to these issues where the DIP lender is going to essentially wind up owning the majority of the company.” He also noted that three separate lawsuits have been brought by shareholder seeking class-action status against Ener1 in New York and admonished the company’s legal team to be prepared to answer questions and provide evidence in the event these shareholders raise questions about the valuation of the company during the upcoming confirmation hearing.
The largest unsecured stakeholders are Goldman Sachs Group Incorporated with creditor notes valued at $10.3 million, and Liberty Harbor Special Investments LLC, with notes totaling $39.5 million.
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