Fisker Automotive Files for Delay in A123 Auction

Fisker Automotive Inc. is asking for a delay in the bankruptcy auction of A123 Systems Inc.  In a filing with the bankruptcy judge, Fisker attorney Gregg Galardi said, “A hurried sale process will be damaging to the estates and deprive creditors of value that may be realized through higher and better offers.” The luxury hybrid automaker has said it will also challenge the “debtor-in-possession loan and will seek an extension of a variety of deadlines by at least 30 days.

The deadlines in question include the auction date and bid deadline as well as a number of other related deadlines imposed by the court.

A123 has said it plans to sell its automotive business assets to auto parts maker Johnson Controls Inc. for a reported $125 million.  A123 received $249 million in federal grants in 2009. In its August 31 Chapter 11 filing, A123 reported assets totaling $459.8 million and debt totaling $376 million.

In court documents filed today, A123 said that it is seeking the court’s interim approval of a replacement debtor-in-process which would allow it to accept the remainder of a $72.5 million loan from Wanxiang America Corporation.  The court approved the loan of up to $15.5 million in debtor-in-process loans from Johnson Controls on October 18.

A123 says it is not opposed to the sale of its assets but wants “various protections.”  According to Galardi, “The best interests of the estates are not well served through a hasty and unfair sale process designed to ensure that JCI is the ultimate purchaser.”  Among the provisions A123 sees as “excessive, and counterproductive” are a possible $7.75 million breakup fee and reimbursement for expenses.

According to court papers, a January 2010 agreement between A123 and Fisker Automotive, whereby A123 would provide batteries for the Karma electric plug-in hybrid “give rise to substantial unsecured claims.” Those claims could amount to more than $100 million.

U.S. Trustee Mark Kenney has also objected to Johnson Controls’ breakup fee which he said is not necessary in order to preserve the value of A123’s estate.  The University of Montreal has also asked to judge to consider A123 has the right to keep or transfer its lithium battery technology patents in any potential sale.

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