Oct. 18 (Bloomberg) -- Solyndra LLC, the bankrupt solar- panel maker under investigation related to a $535 million loan guarantee from the U.S. government, persuaded a judge not to appoint a trustee to take over its bankruptcy case.
U.S. Bankruptcy Judge Mary Walrath in Wilmington, Delaware, denied the request of the U.S. trustee, an arm of the U.S. Justice Department that monitors corporate bankruptcies, saying at a hearing yesterday that “this case does not rise to the level of failure to disclose that would mandate the appointment of a trustee.”
Walrath allowed the company to hire R. Todd Neilson as chief restructuring officer to replace its chief executive officer. I think the “appointment of a CRO is a good compromise,” she said.
The solar-panel maker filed for Chapter 11 reorganization on Sept. 6 and was raided two days later by the Federal Bureau of Investigation. Solyndra, based in Fremont, California, said it had assets of $859 million and debt of $749 million as of Jan. 1. When the petition was filed, the company said its secured debt was $783.8 million.
Solyndra’s collapse prompted congressional scrutiny of President Barack Obama, who praised the company during a May 2010 tour of its facilities.
Based in Fremont, California, the company faces probes by the FBI and Republicans in Congress over a $535 million federal loan guarantee it used to build a $733 million factory.
Solyndra Chief Executive Officer Brian Harrison left the company earlier this month after refusing to answer questions from a congressional committee about the solar-panel maker’s collapse two years after receiving government-backed funding.
Harrison and Chief Financial Officer W.G. Stover asserted their constitutional right not to answer questions related to a criminal matter.
The U.S. trustee argued the company’s management needs to be displaced because of the distractions the investigations pose and its refusal to answer questions about customer contracts. A Solyndra executive, Benjamin Schwartz, refused to answer a question about $1.2 billion in contracts referenced in a 2008 company statement while being interviewed by the trustee’s bankruptcy analyst, Jeffrey Heck, according to the U.S. Trustee.
“The overarching requirement is for transparency, and they can’t erase that or trump that,” Lisa D. Tingue, a lawyer for the U.S. trustee, told Walrath. Tingue said the U.S. trustee lacks confidence in the company’s board of directors and is also concerned that Stover remains as the company’s CFO.
Walrath sided with Solyndra’s lawyers, asserting there was no evidence of fraud or mismanagement.
‘Highest and Best’
“Now the company can move forward and get the highest and best offer for its assets,” Richard M. Pachulski, a lawyer representing Solyndra, said in an interview after the hearing. He said the request for a trustee was “unnecessary.”
The company received court approval last month to hold an Oct. 27 auction to sell its core assets, including the Fremont factory. The timeframe for the sale may be extended to until about Nov. 16 to Nov. 18, Pachulski said.
Solyndra won approval yesterday to hold an auction from Nov. 2 to Nov. 5 for assets that aren’t essential to the business going forward.
The case is In re Solyndra LLC, 11-12799, U.S. Bankruptcy Court, District of Delaware (Wilmington).
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