In February 2011, the Department of Energy’s legal team wrote a memo justifying the decision to restructure the terms of the $535 million loan guaruntee to solar panel manufacturer Solyndra, arguing that it would save taxpayer money by averting a bankruptcy. A little over eight months later, the company went bankrupt anyway, and as a result of the restructuring, private investors will be able to leap in front of taxpayers in getting repaid.
The memo, written by Susan Richardson, chief counsel of the DOE’s loan programs office, read that, “DOE has determined that a restructuring of the Borrower’s obligations under the Loan Guarantee Agreement (the “Restructuring) will yield the highest probable net benefit to the Federal Government by minimizing the Federal Government’s potential loss on the Guaranteed Loan.”
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The memo went on to say that, “Absent continued funding of the Guaranteed Loan, the Borrower has indicated that it would file for reorginization under Chapter 11 of the Bankruptcy Code or liquidation under Chapter 7 of the Bankruptcy Code, impeding or preventing Project completion.”
As part of the restructuring, taxpayer claims to be repaid in the event of a bankruptcy were put behind private claims.
Republicans, noting Treasury Department emails expressing concern, have raised issues as to whether this subordination of taxpayers was even legal. But the memo concluded that it was permitted, in part because, “subordination in the context of the proposed Restructuring will further the express statutory intent that the Secretary seek to maximize the prospects of repayment of borrows’ obligations (as well as the technology and job preservation goals of Title XVII).”
