The $535 (or $528) million Loan
Obama administration officials defended a $528 million loan to Solyndra, but stated that federal investment in alternative energy must continue. [emphasis mine] The Obama administration stood by Solyndra, through auditors warned to not risk an initial public offering and a refinancing where taxpayers were behind new investors. A day before Solyndra ceased operations, the Energy Department turned down the company’s request to renegotiate the US loan agreement, saying “a second restructuring was not feasible.” And Department of Energy (DOE) executives participated in day-to-day operation of Solyndra.
DOE guarantee of a $535 million loan to Solyndra was small change. For example, First Solar, for its Sunlight and Topaz projects, received $3.7 billion. The DOE loan guarantees go to risky endeavors such as Solyndra. But, the government gave loans and breaks to Solyndra, backed by a major supporter of President Obama. Evidence suggested the government-backed venture was rather risky. Obama’s DOE pressed forth in the face of a sea of warnings in awarding its green energy loan. In 2008, Solyndra asked DOE for a loan to build a new plant to produce its unique solar panels. Fitch gave Solyndra a B+ credit rating. Dun & Bradstreet had already issued a credit appraisal of the company. Its assessment: “Fair.” Fitch Ratings spokeswoman Cindy Stoller said a B+ rating: “It’s a non-investment grade rating.” She provided a company ratings definition, showing that B+ falls between a “highly speculative” B and “speculative” BB.
When asked about the ratings, energy officials said DOE conducted “extensive due diligence” on the application, which included consideration of the Fitch rating. “We believed the rating, which is used to inform our analysis of potential risks associated with the loan, was appropriate for the size, scale and innovative nature of the project and was consistent with the ratings of other innovative start-up companies,” said spokesman Damien LaVera. In March 2009, Energy Secretary Steven Chu announced DOE’s guarantee of $535 million going to Solyndra. The loan would be provided by the Treasury Department’s Federal Financing Bank, with the Energy Department guaranteeing the issue in case of default.
Bottom line: Taxpayers were bankrolling Solyndra’s venture.
E-mails Show the WH Stayed Informed
E-mails showed the WH monitored DOE deliberations over whether to make a $535 million taxpayer-backed loan to Solyndra, a politically-connected solar energy company. Solyndra’s solar panel factory was touted as a centerpiece of Obama’s stimulus-backed green energy plan – billed as a way to jumpstart a promising new industry while creating jobs. Internal WH emails show the Obama administration monitored progress of the Solyndra loan, even as analysts expressed concerns about the risk involved. An analyst at the OMB advised against moving too quickly. Then DOE announced its commitment to guarantee the Solyndra loan, which the administration had fast-tracked as the first green energy project backed by stimulus dollars. Obama wanted to unveil the announcement while he was on a visit to California.
White House emails suggests the Obama administration pushed for approval of a $535 million loan to Solyndra, even as WH analysts warned the deal was “not ready for prime time.” The emails appeared to show the administration rushed to get the loan approval in order to announce the loan at Solyndra factory groundbreaking in September 2009. “One e-mail from an OMB official referred to ‘the time pressure we are under to sign-off on Solyndra.’ Another e-mail said, ‘There isn’t time to negotiate.’” Vice President Joe Biden’s chief of staff, Ronald A. Klain, had his reservations. “If you guys think this is a bad idea, I need to unwind the W[est] W[ing] QUICKLY,” Klain wrote in March 2009.
A House committee, the Energy and Commerce Committee, want to have the Obama administration provide answers for risking taxpayer money on Solyndra. “It is not the role of government to pick winners and losers in the market,” said Reps. Fred Upton (R-Mi) and Cliff Stearns (R-Fl). “How did this company, without maybe the best economic plan, all of a sudden get to the head of the line?” Upton said. The committee has been investigating Solyndra for six months, and wants to hear from officials with the DOE and the OMB, which played the central roles in approving the loan guarantee. The loan guarantee is an insurance policy against a company’s debt in the event of default. In Solyndra’s case, the guarantee came from the federal government.
House Republicans are planning to widen the scope of an investigation into Solyndra. “We can’t reveal the other ones we’re looking at, but we’re certainly looking at loan guarantees made through the Department of Energy related to solar panels, biofuels and the energy grid,” Stearns said. Republicans sent a letter to the White House asking for documents and emails related to the Solyndra loan guarantee.
Taxpayers Subordinated to Investors
The Obama administration let $385 million in taxpayer money for Solyndra be subordinated to money from investors in an unsuccessful effort to keep Solyndra from declaring bankruptcy. Solyndra’s liquidation value was $91 million to $99 million in December, 2010, which would have provided less than a 22 percent return to the government. By subordinating $385 million of the government loan to $75 million from investors, the government calculated that Solyndra’s conservative enterprise value this year would be $240 million to $360 million. So that means that, after paying off investors, taxpayers are the owners of a bankrupt company. The George Kaiser Family Foundation, backed by billionaire George Kaiser, holds about 35.7 % of Solyndra. Not that it means anything (sarcasm intended), Kaiser made 16 visits to the White House since 2009.
“Selection of companies to receive U.S. backing are ‘merit-based decisions’ made by career staffers at the Department of Energy, and the process for this particular loan guarantee began under President George W. Bush,” said DOE spoksman Eric Schultz. “Every project that receives financing through the Energy Departments goes through a rigorous financial, legal and technical review process,” Schultz said. What Schultz neglects to point out is that, during the Bush administration, Solyndra’s loan application was unanimously rejected.
Solyndra is the third US solar manufacturer to fail in a month. Five US companies have been awarded $1.56 billion in loan guarantees through a program championed by Obama. So, if these five companies have the same deal as Solyndra, “we ain’t seen nothin’ yet.”
But that’s just my opinion.Rich Mitchell is the Sr. Managing Editor of Conservative Daily News. His posts may contain opinions that are his own and are not necessarily shared by Anomalous Media, CDN, staff or .. much of anyone else. Find him on twitter, facebook and google+