A123 Systems Inc. (NASDAQ: AONE) is up on financing news this morning, but it is still hard to get excited about penny stocks in bankruptcy. The lithium iron phosphate battery and systems maker confirmed news from late Monday that the United States Bankruptcy Court has granted the bankrupt company interim approval to use $50 million of debtor-in-possession financing.
The DIP financing is being provided by Wanxiang Group Corp. It was also noted:
… the financing supplements the pre-petition $22.5 million of liquidity and letter of credit support that Wanxiang provided to A123, which will remain in place.
It also appears that there is a delay in the Johnson Controls Inc. (NYSE: JCI) asset purchase agreement. The hearing on bidding procedures with the previously announced asset purchase agreement with Johnson Controls that was initiated on Monday, November 5, has been adjourned until a hearing scheduled for November 8, 2012. A123 said:
Johnson Controls consented to adjourn the hearing on this motion so A123 and Johnson Controls could continue discussions with the recently formed Official Committee of Unsecured Creditors and attempt to resolve consensually any potential issues regarding the bidding procedures.
As far as what the DIP financing means, the company said that this financing will allow A123 to operate its businesses and provides additional operational and financial stability as it proceeds with the transaction process.
A123 also made sure to say that being the DIP provider:
… does not give Wanxiang or any other party control over or leverage in A123′s court-supervised sale process. As we move through the transaction process, we will continue to act in the best interests of A123, its employees and its other stakeholders.”
Shares are up over 13% at $0.139 on almost 2 million shares, but at the end of the day this is now just another penny stock in bankruptcy. A123 shares have traded in a 52-week range of $0.05 to $3.34.
As we would warn investors in almost all bankruptcies of public companies, it is very rare for these situations to end up being good for holders of the common stock.
JON C. OGG