A123 Systems warns of severe liquidity problems, possible bankruptcy

Article by Anita Panait, on October 17, 2012

A123 Systems Inc. may not have sufficient cash to finance operations and may need to file for bankruptcy protection, the lithium ion battery maker disclosed in a filing with the US Securities and Exchange Commission. A123 expects to be in default on certain material debt agreements on Oct. 16, 2012. According to the filing, A123 does not expect to be on time with the interest payment due Oct. 15, 2012 on $143.75 million of notes expiring 2016.

The company also does not expect to be on time with a $2.76 million payment due Oct. 15, 2012, in outstanding 6% notes. The company gave no assurance that it could avoid restructuring, reorganization, or a bankruptcy filing. A123 was severely hit by liquidity problems and currently needs fresh funds after it was clobbered by the cost of the recall of batteries for Fisker Automotive Inc.

The lithium ion battery maker disclosed in August 2012 that it was holding discussions with Wanxiang Group Corp., over a possible financing in exchange for a majority stake in A123. The company said that Wanxiang has plans to invest up to $465 million in A123, in return for an 80-percent stake in the company. 

According to its latest SEC filing, A123 said it is considering a number of strategic alternatives to address its liquidity problems, including one or more potential transactions, adding that it is preparing for all contingencies as part of the process. The company, however, gave no assurance that it will be able to pursue a strategic alternative that will allow it to continue to operate its business as a going concern.

Topics: a123, bankruptcy

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