Broke solar-panel company Solyndra is seeking bankruptcy-court approval of its reorganization plan. However, the plan has come under fire from the company's creditors, including the federal government.
The U.S. Department of Energy is concerned that, under the plan, Solyndra would pay back less than half of the $528 million in federally backed loan debt it owes the government, according to Market Watch. The IRS objected to the plan as well, citing the hundreds of millions of dollars in tax breaks the company is to receive post-bankruptcy.
The Energy Department gave Solyndra a $528 million loan guarantee to build a production facility for the company's solar panels. The project was expected to create more than 50,000 jobs. Instead, Solyndra ended up filing for Chapter 11 bankruptcy a little over two years later. Around 1,000 lost their jobs as a result.
A company going through Chaper 11 bankruptcy must create a reorganization plan describing how it intends to pay back its creditors. In order to gather the funds, companies often sell off assets, close branches, lay-off workers, and renegotiate their contracts.
Under its plan, Solynda will continue to operate as a shell company after it sells off its assets and exits bankruptcy. Argonaut Ventures I LLC and Madrone Partners, two of the company's earliet backers, will operate the shell.
The IRS takes claims that the plan's main purpose is "tax avoidance." That's because the shell company will be able to claim nearly $1 billion in tax benefits, according to the IRS. That's big, especially compared to the skimpy $7 million to $8 million unsecured creditors are expected to get under the plan.
The Energy Department, on the other hand, has objected to the plan because most of its collossal loan will go unpaid. The department also claims that the plan fails to protect it's interest in $30 million worth of collateral that was secured prior to the bankruptcy, according to The Associated Press.
We'll have to wait and see whether the plan goes through. A hearing is scheduled for next week.
- IRS Slams Solyndra Bankruptcy Plan (The Hill)
- Corporate Bankruptcy: What Every Investor Should Know (FindLaw)
- Benefits of Bankruptcy (FindLaw)
- Author of 'Rich Dad, Poor Dad' Files for Corporate Bankruptcy (FindLaw's Phoenix Bankruptcy Law Blog)