Solyndra LLC, the failed solar-panel maker that received a $535 million U.S. Energy Department loan guarantee before going bankrupt, faces objections to its bankruptcy plan from the Internal Revenue Service and the Energy Department.
The IRS argues in court papers filed yesterday in Wilmington, Delaware, that the plan can’t be approved because its principal purpose is to allow the owners of Solyndra’s parent, Argonaut Ventures I LLC and Madrone Partners LP, to avoid future taxes.
Under the bankruptcy plan Solyndra’s parent, 360 Degree Solar Holdings Inc., will be reorganized while the failed solar-panel maker will be liquidated. Reorganizing the parent would allow it to exit bankruptcy with as much as $975 million in net operating loss carryforwards intact. The carryforwards may generate more than $300 million in tax breaks, according to court documents.
“The plan proposes that Holdings will emerge from bankruptcy as a no-asset, no-business entity, whose only purpose is to provide future tax benefits to its owners,” the IRS said in the court filing. “The undeniable conclusion is that tax benefits drive this plan.”
Debra Grassgreen, a lawyer for Solyndra, wasn’t immediately available to respond to a phone call seeking comment on the objections.
The IRS claims as far back as December 2010 Argonaut was formulating a way to preserve the carryforwards if Solyndra had to seek bankruptcy protection, saying since then “Argonaut and Madrone went to extraordinary lengths to maximize their value, and to improve the chances that they would some day realize it.”
The Energy Department also objected, saying the plan doesn’t protect its interest in the company’s collateral that it had before it sought court protection. Solyndra has spent almost all the money it generated from asset sales so far, the Energy Department said in its objection.
Under the solar-panel maker’s restructuring plan, the government might get little to nothing for its $528 million claim from the loan guarantee. The government is projected to recoup at most 19 percent on $142.8 million of the loan and probably nothing on the remaining $385 million, according to the disclosure statement.
Solyndra, based in Fremont, California, was forced to shut down operations and fire most of its 1,100 workers on Aug. 31, 2011. The solar-panel maker listed $854.1 million in assets and $867.1 million in debt in court papers filed Oct. 31.
The company’s collapse prompted congressional scrutiny of President Barack Obama, who praised Solyndra during a May 2010 tour of its facilities. It was the first company to receive a loan guarantee under Obama’s stimulus program.
U.S. Bankruptcy Judge Mary Walrath will listen to the arguments and decide whether to approve or deny Solyndra’s proposal at a hearing scheduled for Oct. 17.
The case is In re Solyndra LLC, 11-12799, U.S. Bankruptcy Court, District of Delaware (Wilmington).