A123 may have solved its short-term financial problems by raising $50 million in debt on Saturday. But the price of saving the beleaguered lithium-ion battery maker’s immediate concerns could lead to a “death by a thousand cuts” to its share price and long-term viability.
That’s what some analysts are saying about A123’s weekend announcement of a private offering of $50 million in senior unsecured convertible notes and warrants for institutional buyers. The notes carry 6 percent interest and, while they mature in July 2013, they come with bi-weekly payments that can come in cash or in shares of A123 stock, up to $25 million of the total.
A123 said early last week that it would seek the debt financing to help mitigate the crisis caused by its major recall of batteries from its Livonia, Mich. facility, the recipient of $249 million in federal loan guarantees and $100 million in state tax credits.
On Tuesday, A123 reported a record loss of $125 million for the first quarter of 2012, driven by costs associated with the major recall of batteries produces at its Livonia, Mic. factory, which was built with the helpd of $239 million in federal loans and $100 million in state tax credits. The cost of the recall had grown to $66.8 million as of the end of March, with production set to comply with replacement batteries through much of 2012, the company reported.