- The Washington Times - Monday, February 27, 2012

Bankrupt solar-panel maker Solyndra LLC is busy selling off assets, but who owns what’s left over is hard to say.

R. Todd Neilson, Solyndra’s chief restructuring officer, testified last week — five months after the company went bankrupt — that officials still are reconciling what belongs to Solyndra and what belongs to special-purpose entities that purchased its accounts receivable and inventory.

The newly formed entities, Solyndra Solar and Solyndra Solar II, bought up tens of millions of dollars in inventory and accounts receivable in the weeks before the company’s collapse. Solyndra attorneys have characterized the sales as “factoring” transactions aimed at raising capital and improving the company’s liquidity at a time when the California-based solar company’s finances were growing increasingly dire.

Not everyone agrees. The sales, reported by The Washington Times earlier this month, emerged as a key point of contention at a Solyndra bankruptcy hearing last week in Delaware. Scott Leonhardt, a lawyer representing fired Solyndra employees, said the company’s accounts receivable and inventory had been “cherry-picked” by an insider of the company at a discount.

“The entire case is for the benefit of an insider,” he said, arguing that the ongoing liquidation of assets would benefit only the investors. Solyndra attorneys disagreed.

According to bankruptcy records, Solyndra Solar and Solyndra Solar II were formed by affiliates of Solyndra’s debtor in possession lender — major investors Argonaut Private Equity and Madrone Capital Partners — as well as other debt holders.

In bankruptcy filings, Solyndra reported the value of the inventory sold off to Solyndra Solar II at $58.1 million, with the company receiving about $17.5 million in cash.

Madrone and Argonaut have representatives serving on Solyndra’s board of directors.

Steve Mitchell, an Argonaut executive who served on Solyndra’s board, said in an interview with The Times earlier this month that investors did not profit from overall sales of the accounts receivable and inventory. The plan was to give the company more time to turn itself around, he said.

“The $58.12 million reported by Solyndra in its bankruptcy filing is the cost to produce the inventory purchased, with the DOE’s consent, by Solyndra Solar II,” he said, referring to the federal Department of Energy, which awarded Solyndra’s loan guarantees in 2009.

Solyndra’s expected sales proceeds for this inventory was $35 million,” he said. “In the event Solyndra sold these solar panels at the expected price, Solyndra would recover 91 percent of the total sales proceeds.

“The inventory was purchased to give the company more time to turn the corner as Solyndra’s revenues were ramping and its costs were coming down; unfortunately, the macro solar and economic environment at the time proved too difficult.”

Argonaut is the investment arm of a foundation headed by billionaire Oklahoma businessman George Kaiser, who was a fundraiser for President Obama in 2008. Another major investor in Solyndra, Madrone Capital Partners, has ties to the Walton family that owns Wal-Mart.

Solyndra Solar II also has ties to the solar company from which it was purchasing inventory. According to California incorporation papers, Solyndra Solar II’s registered agent was Ted Warrilow, director of taxes for Solyndra.

Mr. Warrilow said in an interview that he served as the registered agent for Solyndra Solar II because officials were in a rush to set up the special-purpose entity.

“Cash flow was becoming critical,” he said. “These were the desperate last minutes to try to keep the doors open and make payroll.”

Mr. Warrilow, who holds no equity interest in Solyndra Solar II, said the accounts receivable and inventory sales were set up for factoring purposes, which he called fairly commonplace.

To sell the inventory, Solyndra formed its own special entity called Solyndra Financing LLC. Both Solyndra Solar and Solyndra Solar II were created to “raise additional capital and improve debtor’s liquidity position” in the months before the company went bankrupt, attorneys said in filings.

The formation of Solyndra Solar LLC and Solyndra Solar II LLC was first disclosed in bankruptcy filings last year, but records at the time did not reveal just how much inventory and accounts were being sold off. In addition to the inventory sales, the company also sold $59.1 million in accounts receivable to Solyndra Solar LLC for $46.4 million in cash, according to bankruptcy filings.

The bankruptcy filings don’t say how bankruptcy attorneys arrived at the $58.1 million figure for the inventory.

Asked at last week’s bankruptcy hearing by Solyndra attorneys whether the inventory and accounts receivable transactions reflected book- or market-value figures, Mr. Neilson said he did not know.