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UPDATE: A123 Systems (AONE) Misses Q2 Views, But New China Deal Has Investors Interested

August 8, 2012 7:19 AM EDT Send to a Friend
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(Updated - August 8, 2012 7:21 AM EDT)

A123 Systems, Inc. (Nasdaq: AONE) could pop higher Wednesday morning following an earnings announcement as well as other positive news for the company. Shares are halted as of 7:20am EDT.

Reported earlier, A123 reported a wider than expected Q212 loss of 56 cents per share, with revs about 26 percent below expectations at $17 million.

But, A123 also said it entered an MOU with Wanxiang Group Corp to the tune of $450 million.

More detail of the MOU from the release:

" Under the proposed terms of the strategic agreement outlined in the MOU, Wanxiang would provide A123 with up to $75 million in initial debt financing under a Senior Secured Bridge Facility, with an initial credit extension of $25 million and $50 million to be funded after the satisfaction of certain closing conditions, and, subsequently, upon satisfaction of certain closing conditions, purchase $200 million aggregate principal amount of A123's Senior Secured Convertible Notes. The agreement would also include the potential for Wanxiang to invest up to an additional $175 million if it exercises the warrants that would be issued in connection with the Bridge Facility and the Convertible Notes for cash. Incurrence of the remaining $50 million of loans under the Senior Secured Bridge Facility would be subject to the satisfaction of certain approvals and conditions, including receipt of favorable determination from CFIUS and receipt of Chinese government approvals. Issuance of the Convertible Notes and the related warrants would also be subject to additional conditions, including approval from A123's shareholders, termination of the Hart-Scott-Rodino waiting period, the conversion or redemption of all the outstanding six percent Convertible Notes and relevant warrants and the repurchase or retirement of at least 90 percent of A123's outstanding 3.75 percent convertible subordinated notes due 2016.

According to the proposed terms of the strategic agreement, if the entire amount of the initial debt financing is provided to A123 and the full amount of the warrants and Convertible Notes are issued and exercised for cash, Wanxiang's total capital investment in A123 from these agreements would total approximately $450 million. The total amount of shares of A123's common stock issuable upon exercise and conversion of the warrants and Convertible Notes would represent approximately 80 percent of the then outstanding common stock of A123. While the MOU is non-binding and the execution of definitive documentation is subject to negotiation and, among other items, the amendment of agreements with certain of A123's existing lenders, A123 and Wanxiang are currently negotiating definitive documentation and intend to close the full transaction by the end of 2012. A123 cannot provide any assurance, however, that definitive documentation will be executed, or, if it is executed, that the conditions to funding the full investment will be fulfilled."




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