Zywicki on Solyndra Sell Off

Commenting in the Washington Times on the sell off of Solyndra LLC's assets, Professor Todd Zywicki noted that selling inventory at a substantial reduction in value was troubling.

"The test under the bankruptcy code is whether the sale was for reasonably equivalent value and selling inventory at such a huge discount raises real concerns." Zywicki said. "If Solyndra Solar II is owned or controlled by any insiders or anything like that, then it becomes even more suspicious."

Zywicki pointed out that while it is not unusual for companies in financial trouble to sell off assets, the sale of $58.1 million in inventory for $17.5 million in cash seemed out of the ordinary.

The purchaser of Solyndra LLC's assets was a newly formed corporate entity, Solyndra Solar II, closely tied to some of the company's largest investors. The company was formed in Delaware by affiliates of Solyndra's debtor in possession lender, investors Argonaut Private Equity and Madrone Capital Partners, as well as some additional debt holders.

Solyndra sold assets cheap for fast cash, The Washington Times, February 8, 2012. By Jim McElhatton.

"Backed by $535 million in federal loan guarantees but burning through the little cash it had left, Solyndra made its first sale in late July to a corporate entity that had been formed just a day earlier. Three more transactions followed over the next few weeks with the same buyer, Solyndra Solar II.

"By the time the last sale took place on Aug. 29 — two days before the company announced plans to file for bankruptcy — Solyndra had sold off a total of $58.1 million worth of inventory for $17.5 million, according to documents Solyndra attorneys filed last month in U.S. Bankruptcy Court in Delaware.

"The sales began at a time when Solyndra officials were trying hard to assure lawmakers and the public of the company's prospects amid increasing questions about the company's financial health. Inside the company, the sales transactions show, officials were moving fast to raise cash and buy Solyndra more time."

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