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Solyndra Violated Terms Of Its Gov’t Loan

From the Wall Street Journal:

Solyndra Said to Have Violated Terms of Its U.S. Loan

SEPTEMBER 28, 2011

Solyndra LLC had such steep financial problems in late 2010 that the company violated terms of its loan-guarantee agreement with the Department of Energy and technically defaulted on its $535 million loan, according to people familiar with the matter.

The failed solar-panel maker, which is under numerous criminal and congressional investigations, ran so short of cash in December 2010 that it was unable to satisfy certain terms of its U.S. loan agreement, these people said. The agreement required Solyndra to provide $5 million in equity to a subsidiary building its factory but cash-flow problems prevented those payments.

The Energy Department ultimately restructured the loan agreement to help keep the company afloat and Solyndra continued to draw money from its loan.

Solyndra’s cash-flow problems in late 2010 had previously come to light but it was not known that the company technically defaulted on its loan and violated its agreement with the U.S. government.

The company’s financial problems prompted the Energy Department early this year to allow it to reshuffle its debt. Under the arrangement, private investors agreed to provide a new $75 million loan and won the right to be paid ahead of the government if the company was liquidated

Lest we forget, most of these investors were major donors to Obama’s 2008 campaign.

Solyndra’s problems came to a head in November 2010 when it told the Energy Department it needed $150 million to make it through early 2012, at which time it believed its cash flow would improve. On Dec. 1, 2010, it was unable to make a $5 million payment to its subsidiary and technically defaulted on its loan.

The loan was officially restructured in February 2011, giving the company enough money to carry it through August. The company, which had drawn down $475 million of the U.S. loan as of Dec. 31, 2010, ended up borrowing $527 million before its bankruptcy.

Rep. Cliff Stearns of Florida, who is heading the Republican congressional investigation into the company, said, "Solyndra ran out of cash in December 2010, yet DOE continued to ignore the red flags and astonishingly doubled down on a bad bet and restructured the loan, further putting taxpayers at risk for what could now be a half billion dollars."

This is how crony capitalism works. Some businesses are just too big politically connected to fail.

Concerns about the program and its risk controls were raised several times by the Energy Department’s inspector general, Gregory Friedman. In a March 2011 report, Mr. Friedman said his office "found that the Loan Guarantee Program could not always readily demonstrate, through systematically organized records, including contemporaneous notes, how it resolved or mitigated relevant risks prior to granting loan guarantees." A report in 2009 also faulted the loan-guarantee program’s controls.

There are also questions about whether the Obama administration should have known about Solyndra’s problems even before the loan guarantee was made. In a previously undisclosed Sept. 9 report, the Congressional Research Service said that by the time of the September 2009 guarantee one of the company’s key advantages—the fact it didn’t use high-priced polysilicon as competitors did—had disappeared.

Polysilicon cost more than $400 per kilogram in 2008 but dropped to slightly more than $50 per kilogram in September 2009, the report said

Yes, Obama should have picked up on this problem right away, with his business savvy.

This article was posted by Steve on Wednesday, September 28th, 2011. Comments are currently closed.

2 Responses to “Solyndra Violated Terms Of Its Gov’t Loan”

  1. River0 says:

    It’s The Chicago Way, razzle-dazzle, shuck and jive, graft, fraud, and larceny.

    This is the moment that will mark Americans for all time; and the fate of our nation hangs in the balance. Do we have the courage to face the hideous reality of The Ruling Class and Regime Media that we’ve allowed to fester and metastasize for so long? I certainly hope so but recognize it could go the wrong way. Nature loves a cliffhanger.

  2. proreason says:

    Turns out customers of solar panels care about how much they pay for them.

    Who could have known that ahead of time?

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