Memo argues Energy legally restructured $535M Solyndra loan

A memo issued earlier this year makes the case that the Energy Department was within its legal rights to restructure the $535 million Solyndra loan guarantee in February as the California solar company faced financial collapse.

The memo became the focus of a hearing Friday of the House Energy and Commerce Committee’s investigative panel, when Democrats on the panel blasted Republicans for refusing to make the memo public. Lawmakers ultimately decided to enter the memo into the public record.

The six-page memo, authored by Energy Department Loan Programs Office Chief Counsel Susan Richardson, says it was legal to restructure the loan in February so that investors who provided additional funding to Solyndra would be repaid before the federal government if the company folded. The memo is dated Feb. 15, 2011.

Republicans have blasted the Energy Department for “subordinating” the taxpayer interest in the restructuring agreement. They argue that the administration was more concerned with protecting Solyndra investors than the taxpayer.

The decision to “subordinate” the taxpayer interest in the restructuring agreement meets the statutory requirements outlined in a portion of the 2005 energy law that created the Energy Department’s loan guarantee program, the memo says.

“On the current facts, the Loan Programs Office has determined that the proposed restructuring offers the best prospect of eventual repayment in full of the Borrower’s obligations under the Loan Guarantee Agreement, and is demonstrably preferable to a liquidation of the Borrower,” the memo says.

“In light of that determination, we conclude that the proposed subordination of the Borrower’s obligations to DOE is consistent with both the text and the purposes of [the law].”

Republicans on the committee have alleged that the “subordination” in the restructuring agreement is a violation of the law.

They heard testimony from two Treasury Department officials Friday on the issue. One of the witnesses — Gary Burner, the chief financial officer for Treasury’s Federal Financing Bank — raised questions about the Energy Department’s plan to restructure the loan.

Internal emails show that Burner told officials with DOE’s loan programs office in February that they might need approval from the Justice Department before approving the restructuring of the Solyndra loan guarantee.

A separate Treasury official, Assistant Secretary for Financial Markets Mary J. Miller, wrote to a White House Office of Management and Budget official in August of this year stating that Treasury believed the “subordination” of the taxpayer interest in the restructuring agreement was illegal.

Miller also complains in the August email that DOE hadn't been sharing information with Treasury on Solyndra's finances and the loan restructuring. Republicans say that is a violation of the 2005 energy law that created the energy loan guarantee program.

At the hearing Friday, Republican lawmakers dismissed the memo as inadequate.

The Energy Department has rejected Republican allegations that the restructuring agreement was illegal, arguing that the lawmakers are misreading the statute that established the loan guarantee program.

The decision to restructure the loan offered Solyndra the best chance to avoid bankruptcy. Solyndra ultimately filed for bankruptcy in early September after laying off 1,100 workers and suspending its solar panel manufacturing operations.