An Associated Press article is reporting that Johnson Controls has dropped out as the debtor-in-possession (DIP) lender for A123 Systems due to a legal issue with Wanxiang Group Corp., an auto parts manufacturer based in China, which is said to be “challenging” Johnson Controls as the lead bidder for the bankrupt battery manufacturer.

Johnson Controls did say that it is still interested in purchasing A123 for $125 million. The article said it plans to increase the purchase offer to include A123’s government business.

A related Wall Street Journal article has noted that Wanxiang Group is now offering to provide at least $50 million in DIP financing to A123, and the company is asking for “emergency approval” of the loan.

The U.S. Bankruptcy Court for the District of Delaware will hold a hearing on bidding procedures of the company on November 5.

To read the WSJ article, click here.

Previously on abfjournal.com:

Court Approves A123 Systems Interim DIP Loan, Friday, October 19, 2012