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Electric Car Battery Maker A123 Expects Debt Default

A worker moves crates for batteries on an assembly line at the A123 Systems AONE +1.27% lithium ion automotive battery manufacturing plant in Livonia, Michigan, U.S., on Monday, Sept. 13, 2010.

Massachusetts-based A123 Systems Inc AONE +1.27%, maker of advanced batteries for electric automobiles, has announced it expects to miss payments on some of its debt, and may need to seek bankruptcy protection. The company, like others in its industry, has been a beneficiary of US federal government grants, in this case to the tune of $249m.

From today’s SEC filing (emphasis ours):

On October 16, 2012, the Company expects to be in default under certain of its material debt agreements. The Company does not expect to timely pay the October Interest Payment due today, October 15, 2012, under the 2016 Notes which non-payment will result in a default under the indenture governing the 2016 Notes, $143,750,000 in aggregate principal amount of which are currently outstanding. Similarly, the Company does not intend to timely pay a 6% P&I Payment due today, October 15, 2012, under the 6% Notes, $2,759,118.69 in aggregate principal amount of which are currently outstanding, which non-payment will result in an event of default under the 6% Notes and will permit the holders of the 6% Notes to require them to be redeemed. The failure to pay the October Interest Payment and the 6% P&I Payment will also result in events of default under the Loan Agreement, but those events of default are temporarily waived under the First Loan Consent and Waiver Agreement and Second Loan Consent and Waiver Agreement, respectively, as described in Item 1.01 of this Current Report on Form 8-K.
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