August 16, 2012 / 2:15 PM / 5 years ago

A123 Systems gets $465 million rescue from Chinese auto parts maker

(Reuters) - Struggling battery maker A123 Systems AONE.O, which got a quarter-billion dollar green technology grant from the Obama administration, has won a $465 million rescue by Chinese auto parts maker Wanxiang Group Corp.

A123 Systems said the planned investment includes an initial credit extension of $25 million that it expects to receive this week. The rest coming through a mix of convertible notes and bridge finance with warrants, as certain conditions are met.

The line of credit would help A123 keep making batteries for electric and hybrid cars. Last month, the company said it was left with only 5 months of cash.

If all the warrants and notes are later converted to shares, Wanxiang will own 80 percent of the firm, A123 said in a statement.

The agreement follows the non-binding memorandum of understanding that A123 signed last week.

A123 shares were trading up 2 percent at $0.48 on Thursday morning on the Nasdaq.

A foreign rescue of A123 has the potential to ignite a political firestorm in this election year, as President Barack Obama could face criticism for bankrolling technology that ends up in Chinese hands.

The advanced car battery industry has been hurt in part by too much capacity and weak U.S. demand for electric cars.

Reporting by Megha Mandavia in Bangalore; Editing by Rodney Joyce

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