A123 Systems, Inc. (NASDAQ:AONE) to approach court for loan from Wanxiang

Electric car-battery maker A123 Systems, Inc.(NASDAQ:AONE), which is currently following bankruptcy proceedings, pans to approach the court seeking approval for a loan from China's Wanxiang Group Corp.

Johnson Controls, which has made a bid to acquire the automotive assets of the company, said that it would withdraw its prior loan commitment to A123.

A123 had filed for bankruptcy a couple of weeks back and Johnson Controls had offered it an interim loan as part of the restructuring of the company.

But subsequently A123 filed papers in court on Friday and said that it had reached an agreement with Wanxiang Group for a replacement loan.

In a statement released late on Friday, Johnson Controls said it is withdrawing the debtor-in-possession (DIP) loan to avoid delays to the bankruptcy process.

"Johnson Controls has chosen not to be the debtor-in-possession lender during A123's bankruptcy process to avoid potential delays," Johnson Controls said in the statement.

Both Johnson Controls and Wanxiang are fighting for control over the bankrupt auto parts firm.

A debtor-in-possession or DIP gives the lender more strategic leverage over the bankrupt company and gives it liberty to demand asset sales as well as set timelines and deadlines for the bankruptcy proceedings.

By withdrawing from the DIP loan, Johnson Controls is effectively ceding advantage to the Chinese company. However Johnson has said that it will maintain its $125 million bid for A123's automotive assets.

A123 declared bankruptcy amid a disappointing market for electric vehicles and after it had to recall battery packs made for Fisker Automotive, which made up 26 percent of A123's revenue in 2011.