'Connected' Energy Firm Got Lowest Interest Rate on Government Loan

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'We Don't Talk to Journalists'

The Federal Financing Bank, created by Congress in 1973 as a part of Treasury to reduce the cost of borrowing, referred questions about the Solyndra loan to Treasury. "We don't talk to journalists," a Bank employee told iWatch last week.

A former official with the federal bank said that typically, key details -- such as the lending rate -- are worked out as part of the negotiation between the borrower and the Department of Energy. One part of the equation on setting such rates, the expert said, is how much private equity is coming to the table.

Solyndra's most prolific financial backer is George Kaiser, an Oklahoma oil billionaire who was a bundler of campaign donations for Obama's 2008 race. Kaiser's Argonaut Ventures and its affiliates have been the single largest shareholder of Solyndra, according to SEC filings and other records. The company holds 39 percent of Solyndra's parent company, bankruptcy records filed Tuesday show.

Under terms of the bankruptcy filing, investors including Argonaut -- which led a $75 million round of financing for Solyndra earlier this year -- will stand in line before the federal government and other creditors.

When Solyndra announced that round of fundraising this February, it noted that the DOE had refinanced terms of the $535 million loan to extend the payment period. Under an "inter-creditor agreement" cited in the bankruptcy filing, the investors in the $75 million financing are considered first lien holders. That leaves Obama officials to confront the prospect of waiting behind private companies.

Energy officials confirmed this arrangement, saying that private investors including Kaiser would first recoup their $75 million, then the U.S. government would have a chance to recover $150 million of its investment. If any money is left, the private investors and the U.S. government would divvy up the remainder in equal shares.

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LaVera, the Energy Department spokesman, said the department agonized over whether to refinance the loan in these terms, but ultimately decided it was worth the risk if it meant prolonging the company's chance for survival.

"This restructuring gave Solyndra and its workers the best possible chance to succeed in a very competitive marketplace and put the company in a better position to repay the loan," he said. "Ultimately, the choice was between imminent liquidation or giving the company and its workers a fighting chance to succeed."

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