Solyndra - A few new facts. A few new questions

Bruce Krasting's picture
I have, on numerous occasions in the past, written an article that took the form of a question to readers. I present some demonstrable facts. Then I pose the question(s), "What do you think?" "What do you know?" I'm “smarter” as a result of the responses I have gotten. I think others are as well.

I’m going to take this to a different level. The following questions are directed to my usual readers. They are also directed to the actors in the Solyndra story. The DOE, OMB, company execs (past and current), the equity owners, the lawyers and the MSM could chime in with an explanation. This blogger/taxpayer is seeking some clarity on the following.

There are questions of who did what to whom and when. There is an aspect to this that has not yet (to my knowledge) been discussed in the media. (Note-I tried to make this easy to follow. It isn't. Sorry)

On July 29, 2011 (just five-weeks before going bankrupt) Solyndra (“SOL”) entered into a transaction whereby it sold both the Accounts Receivables (IOUs from panels sold) and the Inventory (panels) of the company ("the A/R Transaction”). Solyndra Financial (“SOLF”) (a subsidiary of SOL) was the seller. The purchaser was a newly formed company called Solyndra Solar II LLC (“SSII”). The following is the only information that I could find about SSII. Note that the company was organized in the Sate of Delaware one-day before the sale of significant assets of SOL.

It is clear from the limited information from the bankruptcy court that the A/R transaction took place. From the SOL, INTERIM ORDER (I) court filing: (Emphasis mine)

Inventory Accounts Receivable Trust Funds. Prior to the Petition Date, Debtor Solyndra LLC (as servicer), one of its subsidiaries, Solyndra Financing LLC (as seller), Argonaut Solar LLC (as agent), and Solyndra Solar LLC (as buyer), entered into that certain Amended and Restated Purchase and Sale Agreement dated as of July 29, 2011 (the "A/R Sale Agreement"). Pursuant to the A/R Sale Agreement, Solyndra Solar LLC purchased certain of the accounts receivable resulting from the sale of the Debtors’ inventory and owns and has the right to receive the proceeds of collection of such accounts receivable. In addition, Solyndra LLC (as servicer), one of its subsidiaries, Solyndra Financing LLC (as seller), Argonaut Solar LLC (as agent), and Solyndra Solar II LLC (as buyer), entered into that certain Inventory Purchase and Sale Agreement dated as of July 29, 2011.

I have found no explanation/details for this transaction. It is clear that a purchase/sale took place. The question of how much was sold and at what price is not clear. It is also not clear what Argonaut Solar is doing in this deal. Argonaut is a name that George Kaiser uses. His family investment vehicle channeled money to SOL through a company called Argonaut Ventures. Why would a company controlled by GK have a role as Agent between the buyer and seller of SOL’s assets? A question to ask is whether GK has (directly or indirectly) an interest (equity or debt) in SSII.

Again, both receivables and inventory were sold. A question is, “Was this a material transaction?” The court docs suggest there is real money involved.

As of September 2, 2011, there was approximately $3,866,342.83  in Inventory Accounts Receivable Trust Funds being held in the Inventory AIR Purchaser Trust Accounts.

There was nearly $4mm of cash in the account!  There are, no doubt, other receivables to come in the future. Clearly the sale of receivables was material.

I have no information from public documents regarding the scope of the sale of inventory. I have information from a former Solyndra employee (Yes, this person will remain anonymous). I believe that the following is factual. A third party confirmation of this is required. (Love to hear from you). With that said:

It seemed like the company had been hoarding panels in the last month. We were producing a great deal of material, but holding off on shipments.

We were stacking up panels everywhere. Our old building was packed with them, but we had some huge orders in the works. Usually we shipped most of the material in the last week of the quarter, so this was not completely unusual.

We had close to three months worth of panels and we were on track to sell about two hundred million this year. That works out to about fifty million in inventory.

Make what you will of this. What is the value of inventory that is not yet sold? Answer: A fraction of the sale value referred to above. But even a small fraction is still a material number.

Argonaut (GK) has separately offered to provide a post bankruptcy loan of $4mm ("DIP"). There are many terms required by Argonaut. One requirement relates to the A/R sales. From the docs:

It is a condition to funding under the DIP Facility that the Inventory Accounts Receivable Trust Funds being held in the Inventory A/R Purchaser Trust Accounts are released to Argonaut Solar, LLC, as agent for the Inventory A/R Purchasers.

Argonaut's (very good) lawyers make their position very clear as to who owns the assets in the A/R accounts.

The Purchased Inventory (including any proceeds thereof) and the Inventory Accounts Receivable Trust Funds (including any proceeds thereof) are property of the Inventory AIR Purchasers and not property of the Debtors’ estates.

In other words, Argonaut is willing to make a new $4mm  loan, PROVIDED that the Judge releases (at least $3.86m) back to an entity that Argonaut is connected to (SSII). In addition, the Judge would be functionally sanctioning the A/R sale. The inventory (whatever it is worth) and the receivables (whatever they are worth) will be excluded from the Debtors Estate. That means that there is even less of a chance that Uncle Sam sees a penny of the money that he (we) are owed.

One additional point from the unnamed ex-employee:

It seems liked Solyndra was racing to spend all the federal money right up till the end.

There are many possible explanations for the July 29 A/R sale. This could have been an arms-length transaction that was a last ditch effort to save SOL. This could also be something a bit more malodorous. I don’t know.

This is a unique bankruptcy. A significant amount of public money has been lost in a startup company. While the details of the A/R deal may be kept confidential, the question marks that this transaction raises will not go away.

Don't read this and conclude that I’m suggesting wrongdoing on anyone’s part. That’s not the case. What I’m looking for is some clarity and opaqueness. I think the country deserves that.