By Tom Hals
WILMINGTON, Del, Dec 11 (Reuters) - The creditors of
bankrupt A123 Systems Inc are supporting a Chinese company's
controversial bid for the U.S. maker of electric car batteries,
the creditors' attorney said on Tuesday.
The attorney, William Baldiga, said he expects the sale to
be quickly approved by a bankruptcy court later Tuesday, but
China's Wanxiang Group still needs regulatory clearance to
acquire A123, which was funded partly with U.S. government
money.
Wanxiang, China's biggest maker of auto parts, bid $257
million for A123, topping Johnson Controls Inc on
Saturday in a bankruptcy auction. Wanxiang's interest in A123
has sparked protests from U.S. politicians about transferring
taxpayer-funded technology to an economic rival.
A123 has never turned a profit and received a $249 million
grant from the U.S. Department of Energy to develop lithium-ion
batteries.
The battery maker's unsecured creditors "absolutely" support
the sale to Wanxiang, said Baldiga, of law firm Brown Rudnick,
who represents the official committee of A123's unsecured
creditors.
Dozens of objections to the sale have been filed with the
U.S. Bankruptcy Court in Delaware, which is handling A123's
Chapter 11 bankruptcy case. Baldiga said he expects most of
those objections to be resolved quickly at Tuesday's hearing,
scheduled for 2 p.m. EST (1900 GMT).
The most prominent objection may have been settled on
Monday, when a Department of Energy official said the remaining
$120 million of grant money would not be transferred to
Wanxiang.
The Chinese company still needs the approval of the
Committee on Foreign Investment in the United States (CFIUS) to
close the deal. Pressure has been building on Treasury Secretary
Timothy Geithner, the head of the panel, to block the takeover.
Wanxiang's bid excludes A123's defense contracts. But a
group of former military leaders and industrial consultants said
in a statement on Tuesday that A123's commercial and defense
businesses were too similar to allow the sale to a Chinese
company. The group, the Strategic Materials Advisory Council,
has urged Geithner to stop the sale.
A123 filed for bankruptcy in October as demand for electric
vehicles did not live up to expectations and it was forced to
recall defective car batteries. Its customers include Fisker
Automotive, General Motors Co and BMW.
Baldiga said that if the foreign investment committee does
not approve the sale in the coming weeks, Wanxiang could walk
away, although it would forfeit a $25 million deposit that would
go toward repaying A123's creditors.
If that were to happen, A123 could then go back on the
block, and Johnson Controls has said it was "very interested" in
bidding again. Johnson Controls and NEC Corp of Japan made a
final bid of about $251 million, according to Alex Molinaroli,
president of Johnson Controls Power Solutions.
The only other company that qualified for the auction,
Siemens AG of Germany, does not appear to have made a bid,
according to a transcript of the auction.
If the foreign investment committee has not approved the
sale by Jan. 15, the deal could still close by transferring A123
to a trust controlled by U.S. citizens. Baldiga said there was
"good precedent" for structuring the deal using such a trust,
which would not need CFIUS approval.
In that case, the money from Wanxiang would be used to repay
the creditors of A123, which filed for bankruptcy with $376
million in liabilities. It would then be up to Wanxiang to
resolve any foreign investment committee objections.
The case is A123 Systems Inc, Delaware Bankruptcy Court, No.
12-12859.
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