(Bloomberg) -- A123 Systems Inc., the bankrupt maker of electric-car batteries that received a $249.1 million federal grant, won court approval to borrow $50 million from China's Wanxiang Group Corp.
U.S. Bankruptcy Judge Kevin Carey gave interim approval for the loan Monday in Wilmington, Del.
Wanxiang replaced Johnson Controls Inc. as the lender for A123's Chapter 11 case.
Johnson Controls said it withdrew as the lender to avoid a fight over the financing.
A123, based in Waltham, Mass., filed for bankruptcy protection last month with plans to sell its automotive-business assets to Milwaukee-based Johnson Controls for about $125 million.
Wanxiang said last week it wants to be the lead bidder at an auction for A123's assets.
Carey heard brief testimony today from Robert M. Caruso, a managing director with Alvarez & Marsal North America, who said delaying the auction for a month, as requested by some objectors, would cost the company too much money.
The company spends about $25 million a month in cash, Caruso said. Carey will hear further testimony at a hearing on Nov. 8.
Objectors to parts of the proposed sale procedures were Fisker Automotive Inc., the official committee of unsecured creditors, the U.S. Trustee's office, Wanxiang, and patent holders, among others.
Fisker and Wanxiang are seeking an extension of at least 30 days in the bid deadline, auction date and related dates, and deadlines in the bidding procedures request, court papers show.
A123 asked the court to deny Wanxiang America Corp.'s requested delay, saying the company "may not be able to secure the governmental regulatory approvals it is seeking even under this extended timeline," including from the Committee on Foreign Investment in the U.S., according to court papers filed Nov. 3.
"Because of this potentially lengthy process, there is no guarantee that Wanxiang would obtain CFIUS approval even if the sale process were adjusted and extended," A123 said.
U.S. senators John Thune, a South Dakota Republican, and Iowa Republican Chuck Grassley expressed concerns about A123's financing deal with Wanxiang in a letter to U.S. Treasury Secretary Timothy Geithner.
They pressed Geithner, who chairs the committee, "to protect U.S. military and taxpayer interests while reviewing the potential transaction," according to a Nov. 1 statement.
CFIUS, a multiagency group led by the Treasury Department, reviews mergers and acquisitions for national-security concerns when a takeover may give a foreign owner control of a U.S. company.
While filings are voluntary, the committee can begin its own review.
"A123 has received millions of taxpayer dollars to develop technology and intellectual property that should not simply be shipped to China," Thune said in the statement.
In its Chapter 11 bankruptcy petition, A123 listed assets of $459.8 million and debt of $376 million as of Aug. 31.