Judge Approves Solyndra Bankruptcy Plan, Despite Objections From Federal Agencies

Solyndra LLC will be permitted to move forward with its proposed bankruptcy exit plan following court approval from U.S. Bankruptcy Judge Mary Walrath.

Under the plan, the failed solar-panel maker will be liquidated, while its parent company, 360 Degree Solar Holdings Inc., will exit bankruptcy law protection with roughly $975 million in net operating loss carryforwards, which may be used against future income. Potential tax breaks for investors Argonaut Ventures I LLC and Madrone Partners LP may amount to as much as $341 million.

Both the Internal Revenue Service and U.S. Department of Energy strongly objected to Solyndra’s bankruptcy exit plan for separate reasons.

Solyndra received a $535 million loan guarantee from the Energy Department prior to its bankruptcy filing, and the federal agency argued that its exit plan will not allow the government to recoup any money for its $528 million claim. Madrone Partners and Argonaut Ventures I rank ahead of the government in repayment, increasing the likelihood that it won’t receive recovery on claims.

The IRS took a different approach and contested the plan as a ploy to allow its investors to avoid taxes. However, Judge Walrath rejected this argument in her court ruling, noting that she did not see tax avoidance as Solyndra’s primary motivation.

“It is clear in this case the bankruptcy and the reorganization dealt with many other things than the value of the net operating losses or the preservation of the NOLs,” Judge Walrath said, citing other agreements the solar-panel maker reached with its creditors and employees.

The latter refers to a $3.5 million settlement Solyndra made with former workers, who argued they did not receive adequate notice before being laid off.

Joel Glucksman is an experienced civil and bankruptcy litigator specializing in the representation of secured lenders and other creditors in complex suits and bankruptcies. His court appearances take him throughout the State and Federal courts in the metropolitan area, focusing in particular on the Bankruptcy Courts for the District of New Jersey and the Southern and Eastern Districts of New York. For more information, please visit Joel Glucksman's full biography at Scarinci Hollenbeck

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