Wednesday, September 28, 2011

Gov't Restructured Solyndra Loan after Company Violated Terms, Allowed Extra $50 Mil in Loans

There are already a tremendous amount of unsettling things about the $535,000,000 loan to Solyndra that happened in 2009:  the loan occurred after the Bush Administration said giving the solar company was too risky.  Solydra's executives were huge Obama donors.  President Obama and Vice President Joe Biden made public statements in favor of Solyndra before the loan, despite being briefed that the company was facing major problems.

And just yesterday it was discovered that the IRS had given Solyndra a "favorable ruling" just weeks before it  received half a billion dollars in Stimulus money, raising questions about whether the Obama White House was pulling strings for the company with other governmental departments.

Now there is this.  According to a report released today, a year and a half after being granted an enormous government loan, Solyndra violated the terms of that loan and technically defaulted on it.  This should have frozen the loan that the energy company received, thus not allowing them to use up the rest of the money the government had given them.  However, that did not happen.
Instead, it has been revealed that the Energy Department went out of its way to restructure the loan to Solyndra, thus allowing them to violate the terms of the loan and yet continue to use it.  The violation occurred in December of 2010, when Solyndra was so "short on cash" that it could not follow through on some aspects of the agreement.

In the new contract that the Energy Department created, private investors agreed to give $75,000,000 to the struggling company.  On top of that, the new terms stated that, should Solyndra be liquidated, the private investigators would be paid ahead of the government.  In other words, if there was any money remaining with the company, the money taxpayers gave to Solyndra would be repaid last, if at all.

It is ironic that the government decided to give Solyndra extra money and easier terms not when they were succeeding, but after it was readily apparent that they would likely go under.  The fact that possibility is included in the new contract is damning enough.
The violation of the original agreement came when Solyndra did not provide "$5 million in equity to a subsidiary building its factory," which it was supposed to.  The company claimed that occurred because of a "cash-flow problem."

If the loan was not restructured, which happened officially in early 2011, it would have saved taxpayers over $50,000,000.  The energy company had gone through approximately 90% of its loan by this time, but after they violated the terms, they technically had no right to take the rest of the money.  However, the Energy Department's intervention allowed Solyndra to use up the rest of the money.

These new discoveries, on top of the ones already out in the open, could further inflame a situation that is inflamed in the first place.  This report means that the government not only ignored warnings in 2009, but actually knew that Solyndra was on the cusp of failing and allowed the company to use more funds and allowed the company to violate loan-terms and get away with it.

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