Solyndra LLC had such steep financial problems in late 2010 that the company violated terms of its loan-guarantee agreement with the Department of Energy and technically defaulted on its $535 million loan, according to people familiar with the matter.
The failed solar-panel maker, which is under numerous criminal and congressional investigations, ran so short of cash in December 2010 that it was unable to satisfy certain terms of its U.S. loan agreement, these people said. The agreement required Solyndra to provide $5 million in equity to a subsidiary building its factory but cash-flow problems prevented those payments.
WSJ's Ryan Tracy reports a new Congressional report says warnings about Solyndra's competitive abilities came out before the government awarded the company a $535 million loan guarantee and the company's subsequent collapse.
The Energy Department ultimately restructured the loan agreement to help keep the company afloat and Solyndra continued to draw money from its loan.
Solyndra's cash-flow problems in late 2010 had previously come to light but it was not known that the company technically defaulted on its loan and violated its agreement with the U.S. government.
The company's financial problems prompted the Energy Department early this year to allow it to reshuffle its debt. Under the arrangement, private investors agreed to provide a new $75 million loan and won the right to be paid ahead of the government if the company was liquidated.
The default is the latest indication of the serious financial troubles afflicting California-based Solyndra, which filed for bankruptcy protection earlier this month. It will likely add to questions surrounding the Obama administration's backing for the company even as its financial problems mounted.
Administration officials have defended the initial loan guarantee and subsequent restructuring, saying they were trying to protect taxpayers. Jonathan Silver, executive director of the loan program, recently told lawmakers the government faced the difficult choice of either forcing Solyndra to close its doors or approving the restructuring to give it "a fighting chance at success and the government a higher expected recovery on its loan."