Here comes just the beginning of the fall out of solar company Solyndra’s planned bankruptcy, which it announced last week after receiving hundreds of millions of dollars in loans from the federal government and a billion dollars from private investors. According to the San Francisco Business Times, Solyndra has been hit with a class action lawsuit from employees for violating laws that require companies to give 60 days notice before laying off more than 50 workers. In addition, some ugly details are starting to emerge, via Bloomberg, about the Department of Energy’s refinancing efforts of Solyndra, which essentially put a chunk of private investors funds ahead of the government (taxpayers) loans when they were to be paid back.
Class action lawsuit
Up first: the class action lawsuit. Filed in the U.S. District Court of Northern California on Friday night by plaintiff and Solyndra former employee Peter Kohlstadt, the suit claims that Solyndra broke the Worker Adjustment and Retraining Notification or WARN Act, which requires that companies give 60 day warning before laying off 50 or more workers.
As Business Times reporter Lindsay Riddell notes, an exception to the WARN Act is if a company is actively trying to get more funding to keep the business going up until it falters, then it doesn’t have to give 60 days notice. A Solyndra spokesperson tells Riddell that the company was trying to raise new funding up until the last minute.
Anger is to be expected from former employees. The company seems to have given really no indication to its workers at all that there was trouble brewing. To note: 1,100 former Solyndra workers were abruptly let go last week.
Disturbing refinancing details
And now for some truly unsettling information, which is sure to set Republicans up in arms. According to Bloomberg, citing a government document, the Department of Energy, which approved Solyndra for $535 million in loans, let $385 million of its loans take a back seat to funds from private investors during a refinancing round of Solyndra earlier this year. Bloomberg says that in January 2011, private investors gave Solyndra another $75 million to try to stop it from going bankrupt, and that $75 million became senior debt that ensured it would be paid back ahead of $385 million in federal loans.
When Solyndra was refinanced, the DOE had already given it $460 million in loans, and decided to reinvest to help the company avoid bankruptcy, reports Bloomberg. Solyndra also gave the government more collateral, including intellectual property, and Bloomberg quotes the government document that says as of December 2010:
Solyndra had only about a month of cash on hand and faced bankruptcy absent continued funding from the department.
At that time in December 2010, Solyndra was valued at worth $91 million to $99 million in liquidation before the refinancing, or less than a 22 percent return to the government, says Bloomberg. Also read Neal Dikeman’s analysis of how much investors and the government could get out of a Solyndra liquidation (warning: it isn’t pretty).