Bloomberg News

Solyndra Wins Court Leave to Seek Vote on Bankruptcy Plan

September 07, 2012

Solyndra LLC, the failed solar-panel maker that received a $535 million U.S. Energy Department loan guarantee before going bankrupt, won approval to seek creditors’ votes on its reorganization plan.

“With there being no remaining objections, I will approve the disclosure statement and voting procedures,” U.S. Bankruptcy Judge Mary Walrath said today at a hearing in Wilmington, Delaware. The disclosure statement describes the terms of the plans to creditors.

Walrath is to consider approving the plan at a hearing scheduled for Oct. 17. Creditors have until Oct. 10 to both vote for as well as object to approval of the recovery proposal.

Solyndra remedied objections from the government and the U.S. Trustee by adding information to the disclosure statement regarding potential tax breaks of as much as $341 million for investors in Solyndra’s parent, 360 Degree Solar Holdings Inc., including Argonaut Ventures LLC and Madrone Partners LP.

Stuart D. Gibson, a lawyer for the Internal Revenue Service, said while the additions resolved the objection to the disclosure statement he “anticipates filing an objection to confirmation of the plan on behalf of IRS” because the time for exchanging information among parties is shorter than usual with the confirmation date so close.

‘Short Leash’

“We are on a very short leash here,” he told Walrath.

Under the bankruptcy code, a plan can be thwarted if its principal purpose is to avoid taxes. The government would have to prove that is the case.

While Solyndra will be liquidated under the plan, 360 Degree will exit court protection with net operating loss carry forwards of as much as $975 million to use against future income, according to court papers. The reorganized company will have some undetermined business operations in the future supported with investors’ capital.

Under the solar-panel maker’s restructuring plan, the government might get little to nothing for its $528 million claim from the loan guarantee. The government is projected to recoup at most 19 percent on $142.8 million of the loan and probably nothing on the remaining $385 million, according to the disclosure statement.

‘Creditor Support’

The company is “hopeful that they will have creditor support” at the parent level, Maxim B. Litvak, a lawyer for Solyndra, told Walrath.

The reorganized company could also potentially have an additional $11 million to $12 million in tax credits for research and development, according to court documents.

Solyndra’s collapse prompted congressional scrutiny of President Barack Obama, who praised the company during a May 2010 tour of its facilities. It was the first company to receive a loan guarantee under Obama’s stimulus program.

Argonaut Ventures, the investment arm of billionaire and Obama fundraiser George Kaiser’s charitable organization, holds almost 39 percent of Solyndra’s parent.

By early 2011 the fledgling solar startup began to face competition from foreign companies and plummeting prices for materials used in rivals’ products.

In February 2011, Solyndra was forced to restructure its debt to obtain a fresh infusion of funds from existing investors, including Argonaut, according to court papers.

Debt Supplanted

The restructuring caused the government’s debt to be supplanted as the top priority of repayment by the investors’ new $75 million loan. Solyndra drew $69 million on the loan. The investors stand to recover at least 55 percent of their loan, and could see a full recovery.

Holders of $186.6 million in secured debt, which is subordinate to the government’s debt, will also probably see no recovery, according to the disclosure statement.

Unsecured creditors of 360 Degree are projected to get a 3 percent recovery on $27 million in claims, according to court documents. Solyndra’s unsecured creditors, owed $90 million to $135 million, will get an estimated recovery of as much as 3.3 percent.

Solyndra, based in Fremont, California, was forced to shut down operations and fire most of its 1,100 workers on Aug. 31, 2011. The company has preliminary approval of a $3.5 million settlement with ex-workers, who claimed they didn’t get adequate notice before being fired.

The solar-panel maker listed $854.1 million in assets and $867.1 million in debt in court papers filed Oct. 31.

Selling Assets

Solyndra has sold most of its assets and is in the process of selling its plant, built in part using the government funds, after failing to get any acceptable offers to buy the company as a whole and restart operations.

The company has agreed to sell the building to a unit of Dublin-based Seagate Technology Plc for $90.3 million, subject to competing offers at an auction and court approval, court papers show. Solyndra generated about $14.1 million from sales of other assets such as solar-panel tubes, manufacturing equipment, appliances and memorabilia and apparel emblazoned with its logo.

The case is In re Solyndra LLC, 11-12799, U.S. Bankruptcy Court, District of Delaware (Wilmington).

To contact the reporter on this story: Michael Bathon in Wilmington, Delaware, at mbathon@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net


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