Unsecureds to Take Big Haircut in Newly Proposed Solar Bankruptcy Plan

As expected, unsecured creditors will get pennies on the dollar at best if the initial proposal for Solydra’s freshly filed reorganization plan is adopted (eventually) in anything resembling its present form by a U.S. Bankruptcy Court judge.

Solyndra, which announced it was seeking Chapter 11 protection in September amid a declining solar market during recession, high overhead, foreign competition and accusations of fraud; has filed its reorganization plan in a way many companies do when insolvency strikes: in the Third Circuit/Delaware Court. It has long been perceived that said court, based in Wilmington, is the most bankruptcy-friendly in the nation. In the plan, the controversial Solyndra would end up paying out a maximum of 6% of what it owes to unsecured creditors, and that is if proceedings go smoothly. Remember: lengthy court battles which have been prevalent in high-profile cases of late could only draw more funds from the overall pot, and reduce that estimate.

Solyndra, a solar energy company with deep ties to the Obama Administration fundraisers, still is being investigated for fraud. The California company had at one point received more than one-half-billion-dollars in government loan guarantees and was noted by Obama political enemies for its palatial offices.

It’s one of more than a half-dozen filings in the last year by overleveraged alternative energy companies, which was predicted in NACM’s Business Credit Magazine in spring 2011. Producers have alleged that Asian competitors have been offered subsidies by their governments and can no longer compete because they are undercutting them so drastically on pricing and costs. Others note a major factor is oversaturation in the U.S. solar energy/products manufacturing industry, which saw rapid and perhaps unsustainable interest during the waning days of the last economic boom.

-Brian Shappell, CBA, NACM staff writer

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