'Connected' Energy Firm Got Lowest Interest Rate on Government Loan
Solyndra, funded by Obama backer, went bankrupt despite $535 million loan.
Sept. 7, 2011 — -- A politically connected solar company that pocketed a half billion dollar government loan, only to shut its doors, fire workers and file for bankruptcy, benefited from a series of breaks in securing the federal funds -- including an interest rate lower than other green energy projects, iWatch News and ABC News found.
The $535 million loan to Solyndra Inc., issued by the U.S. Department of Treasury's Federal Financing Bank, included a quarterly interest rate of 1.025 percent, the government bank reported in July. Of 18 Energy Department loans cited in the bank's report, Solyndra's rate was lowest. Eight other Energy Department projects, each also backed by the Federal Financing Bank, came with rates three or four times higher, the report shows.
That treatment is in keeping with the history of the loan to the California solar panel maker, an arrangement inked in September 2009 with great fanfare -- and touted, not long after, during a factory visit from the president. Monthly government bank reports filed since then reveal Solyndra's rate as the lowest for any energy-related project in nearly every report; in every case its rate was well below that of most energy projects, which ranged from cutting-edge electric car makers to wind and solar ventures.
Department of Energy officials said the rates for all of its green energy loans were set by the bank using a formula, and Solyndra's favorable terms were not the result of special treatment.
"All borrowers under the [government loan guarantee] program receive the same treatment," Energy Department spokesman Damien LaVera wrote to iWatch and ABC News in response to questions.
READ the Energy Department's Full Response
Solyndra spokesman David Miller agreed, saying Tuesday that the interest rate was based on hard data -- such as when the loan was granted and the length of the repayment period. Solyndra's loan was for seven years, he noted, while other energy loans would have longer repayment periods. Miller pointed to a Treasury spreadsheet showing rates for 20- and 30-year loans are higher than those that are to be repaid in seven.
"It depends on the terms you negotiated," Miller said. "You'd have to look at each one of those other companies and see what their term was and that would probably explain to you what the difference would be."
But records show the advantageous terms came in spite of red flags about the risks of investing in Solyndra. In 2008, as the loan agreement was moving forward, an outside rating agency gave the deal with a B+ grade, a less than optimum score, according to records obtained by iWatch and ABC under the Freedom of Information Act. That same year, the records show, Dun & Bradstreet assigned the company's credit appraisal as "fair."
Analysts say there were warning signs about the deal from the start, when Obama's Department of Energy pitched its first energy loan guarantee as a symbol of the expanding green tech movement. Yet the administration repeatedly took steps that would seem to benefit Solyndra: the Department of Energy announced its loan commitment before all due diligence was completed -- later raising concerns from auditors; the president made a personal visit to tout the company's prospects; and the department agreed to grant Solyndra fast-track approval.
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."
"The decision by Solyndra's executives to terminate more than 1,000 of its hardworking employees without warning and to immediately cut off further payment and benefits was reckless, irresponsible and heartless," Stark wrote. "It may also be illegal. I urge Solyndra's leaders to quickly revisit their decision and do right by their employees."
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