A123 Systems, a Nasdaq-listed lithium-ion battery maker, has agreed to raise up to $450m investment from China-based automobile parts maker Wanxiang Group in return for selling convertible loans worth 80% of its equity.
A123 has been a corporate venturing investor in its customer, Fisker Automotive, but its battery malfunctioned in a test for the electric car maker and so its sales have fallen this year partly as a result and it needed to raise money.
David Vieau, chief executive of A123, said: “[The investment] is the first step toward solidifying a strategic agreement that we believe would remove the uncertainty regarding A123’s financial situation.
“A substantial capital investment from Wanxiang would not only provide financial stability to A123 as we continue to grow, but it would also align us with a large, successful global brand in the automotive and clean-tech industries.”
Wanxiang would provide A123 with up to $75m in initial debt financing under a senior secured bridge facility and purchase $200m aggregate principal amount of A123’s senior secured convertible notes with a 6% yield as against 3.75% for the existing convertible loan notes issued by A123 to investors.
Wanxiang could also invest up to an additional $175m if it exercises the warrants that would be issued in connection with the bridge facility and the convertible notes for cash to give it 80% of A123’s common stock.
The final $50m in loans would await regulatory approval.
A123 was awarded a $249m grant by the US Department of Energy in 2009 and so far has received about half of the funds.
A123 floated just four months after it secured this government grant and its initial public offering (IPO) was the largest of 2009.
At the time of the grant, A123 claimed to have raised more than $350m in equity from private investors, which would include corporate venturing funds representing semiconductor and telecommunications corporation Qualcomm, energy conglomerate General Electric, telecommunications company Motorola and consumer health and wellness conglomerate Procter and Gamble.
In November last year, A123 Systems built on its partnership with Japan-based industrial equipment manufacturer IHI by licensing its battery technology to IHI in return for IHI investing $25m in A123.
Separately, Fisker is reportedly raising $150m for a new round, according to news provider Dow Jones VentureWire. Fisker in April closed its previous round at $410m, according to a regulatory filing, and taking its total then-raised to more than $1bn.