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“A continuing prohibition would, in our view, be inconsistent with the statutory scheme as it would preclude the use of a common restructuring strategy for a financially distressed borrower,” the memo from Ms. Richardson stated. “Investors are unlikely to make an equity investment in a distressed company on commercially acceptable terms.”

Also in justifying the restructuring, the memo cited statutory language that the loan agreement “shall contain such detailed terms and conditions as the Secretary determines appropriate to protect the United States in a default.”

Based on exchanges during the hearing Friday, Mr. Chu is almost certain to be grilled about his department’s decision to restructure the Solyndra loan.

In testimony Friday, Gary H. Burner, chief financial officer for the Federal Financing Bank, an arm of the Treasury Department, said he had never seen another loan restructuring that put taxpayers behind investors in the 28 years he’s worked for the Treasury Department.