(Updates with post-bankruptcy pay increase in seventh paragraph.)
Feb. 22 (Bloomberg) -- Solyndra LLC, the failed solar-panel maker that got $535 million in government loan guarantees before filing for bankruptcy, won court approval to pay some of its remaining workers as much as $368,500 in bonuses.
U.S. Bankruptcy Judge Mary Walrath granted the company approval to pay the bonuses to 20 employees if they can achieve certain milestones during the bankruptcy case.
Walrath overruled objections from Solyndra’s fired workers, who argued the bonuses are for company insiders and aren’t needed for a company that’s liquidating.
“These are rank-and-file people,” and there is no evidence that any of the bonus recipients are insiders, Solyndra attorney Bruce Grohsgal told Walrath. The bonuses, the largest of which is $30,000, cover 13 engineers, five accounting and compliance employees, and two information technology specialists.
Solyndra scaled back its original bonus proposal of $500,000 after negotiating with the committee of unsecured creditors.
The workers getting bonuses “provide an absolutely essential task” and hiring contractors or consultants would be “much, much more expensive than keeping the current employees,” Chief Restructuring Officer R. Todd Neilson testified today. “I think we’ll lose some people” if the bonuses aren’t there as incentives for them to stay, he said.
Scott Leonhardt, a lawyer representing Solyndra’s fired workers, argued the bonuses should be denied because Solyndra failed to disclose that some of the covered employees received large pay increases after seeking bankruptcy. One of the workers eligible for a bonus got raise of 70 percent after the company went bankrupt, he said.
“If that’s happening in bankruptcy cases, I’m shocked,” declared Walrath. The post-bankruptcy salary increases should have been divulged, she said. “I don’t think that’s ordinary course,” referring to actions bankrupt companies take in the ordinary course of business.
The boost in pay was to compensate workers “commensurate with the levels of responsibility that they took on” after the majority of the workforce was fired, Grohsgal told Walrath.
June 30 Deadline
Auctions of the company’s assets, excluding real estate and intellectual property, must be completed by June 30 for some employees to receive their bonuses and a bankruptcy exit plan must be filed by March 31 for others to earn their payments.
Solyndra was to begin a piecemeal auction of its core assets today after canceling an auction last month that could have resurrected some jobs for its former employees, when it failed to draw any acceptable offers to continue operating the company. Debra Grassgreen, a lawyer for Solyndra, didn’t respond to an e-mail seeking comment on the auction.
Sale proceeds “probably would range from $70 million to $120 million,” Neilson said under questioning from Leonhardt.
“I can safely say it will not be $600 million,” Neilson said, referring to a rough estimate of secured debt, including government funds, which would have to be repaid before unsecured creditors could see a recovery. He said the company is still negotiating with buyers for a going concern sale.
The company, based in Fremont, California, sought Chapter 11 protection Sept. 6. Two days later its offices were raided by the U.S. Federal Bureau of Investigation. The solar-panel maker listed about $854.1 million in assets and about $867.1 million in debt in court papers filed Oct. 31.
Solyndra’s collapse prompted congressional scrutiny of President Barack Obama, who praised the company during a May 2010 tour of its facilities. The company faces a probe by Republicans in Congress over the federal loan guarantee it used to build a $733 million factory.
Earlier today Walrath denied a request from the group of Solyndra’s former employees to challenge so-called releases given to lenders, including Argonaut Ventures LLC, under the company’s bankruptcy financing.
The unsecured creditors committee has standing to bring potential lawsuits and is “onboard and actively pursuing” those potential claims, so an additional investigation isn’t necessary, Walrath said.
Argonaut Ventures, the investment arm of billionaire-Obama fundraiser George Kaiser’s charitable organization, holds almost 39 percent of Solyndra’s parent, 360 Solar Degree Holdings Inc.
The case is In re Solyndra LLC, 11-12799, U.S. Bankruptcy Court, District of Delaware (Wilmington).
--Editors: Andrew Dunn, Glenn Holdcraft
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