The Solyndra mess … key points.

The AP published a nice summary of the Solyndra fiasco. Here are some highlights …

* * * * *
Projected Losses

Solyndra was hemorrhaging hundreds of millions of dollars for years before the Obama administration signed off on the original $535 million loan guarantee in September 2009.

The company’s SEC filings outlined losses prior to the loan and said bluntly: “We expect to continue to incur significant operating and net losses and negative cash flow from operations for the foreseeable future.”

“We have incurred significant net losses since our inception, including a net loss of $114.1 million in 2007, $232.1 million in 2008 and $119.8 million in the first nine months of fiscal 2009, and we had an accumulated deficit of $505 million at Oct. 3, 2009,” the company said in a December 2009 filing to the SEC. “We expect to continue to incur significant operating and net losses and negative cash flow from operations for the foreseeable future.”

The DOE brushed off the losses, saying: “Of course start-up companies incur early losses.”

But, the company said: “ … net losses and negative cash flow from operations for the foreseeable future”.

Hard to brush that off.

* * * * *
Subordination of Gov’t Loan

When Solyndra started imploding earlier this year, “The Obama administration restructured the half-billion dollar federal loan to Solyndra in such a way that private investors — including a fundraiser for President Barack Obama — moved ahead of taxpayers for repayment in case of a default, government records show.

The Administrations defense:

Administration officials defended the loan restructuring, saying that without an infusion of cash earlier this year, solar panel maker Solyndra Inc. would likely have faced immediate bankruptcy, putting more than 1,000 people out of work.

Even with the Administration’s agreement to subordinate the gov’t loan to private creditors, Solyndra filed for Chapter 11 bankruptcy protection a few months later and laid off its 1,100 employees.

Remember the auto bailouts when the Administration subordinated secured creditors beneath the unsecured union obligations?

I guess the new rules are simply that Obama supporters get priority claims in bankruptcy proceedings  …

* * * * *
Political jitters

Emails show the White House was worried about the likely effect of a default by Solyndra on Obama’s re-election campaign.

“The optics of a Solyndra default will be bad,” an OMB official wrote in a Jan. 31 email to a colleague. “The timing will likely coincide with the 2012 campaign season heating up.”

The budget official, whose name is blacked out in the email, wondered whether Solyndra should be allowed to restructure its loan.

“Questions will be asked as to why the administration made a bad investment, not just once (which could hopefully be explained as part of the challenge of supporting innovative technologies), but twice (which could easily be portrayed as bad judgment, or worse),” the email says.

News flash: even without a 2nd round of money down the rat hole, the gov’t loan guarantees reads through as “bad judgment, or worse”.

* * * * *
Ken’s big question

Why hasn’t anybody been fired?

If DOE’s head Steven Chu – you know, the Nobel winning scientist —  signed off on this loan guarantee, he should be terminated immediately.

That’s what happens to in private VC firms when a partner loses a half-billion dollars in 18 months on an indefensible investment.

P.S. I don’t think Chu’s Nobel prize was for either oil spill remediation or high tech venture capital work.  If I’m wrong, let me know.

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