Solyndra's request for increased DIP financing draws three objections

By Jim Witters

Wilmington, Del., May 24 - Solyndra LLC's request to increase its debtor-in-possession financing facility to $7 million and extend the facility's termination date drew objections from two of the company's landlords and from the U.S. Trustee's Office, according to documents filed May 23 with the U.S. Bankruptcy Court for the District of Delaware.

The objections came from Global Kato HG, LLC, which leases property to Solyndra in Fremont, Calif., iStar CTL I, LP, which leases property to Solyndra in Milpitas, Calif., and from the U.S. Trustee.

As previously reported, Solyndra hopes to increase the amount of its DIP to $7 million from $4 million and extend the DIP's maturity date through Sept. 29 from June 2.

A hearing is scheduled for 3 p.m. ET on May 30.

Global Kato objection

Solyndra's landlord for the Fremont property states that Solyndra has not paid post-petition rent and other charges since November 2011while its motion to reject the lease remains pending.

The current monthly rent and charges under the lease are $407,680, according to court documents.

Absent a settlement between Solyndra and the landlord, Global's claim for unpaid administrative expenses would be more than $1.6 million, the objection states.

The DIP motion "jeopardizes and impairs potential recovery to Global, while other parties that are provided for in the budget, primarily estate professionals, continue to receive payment," the objection states.

"Put another way, the additional borrowing raises, but does not answer, serious questions as to whether the Chapter 11 cases will be able to provide for full payment of all ultimately allowed administrative claims," Global Kato states.

Solyndra's request should be denied, because the company failed to meet its burden of proof under the bankruptcy code, the objection states.

iStar objection

iStar claims that the only result of Solyndra's request is the "continued asset liquidation that, without question, only benefits the debtors' secured lenders."

"The debtors have offered no evidence to show that they are unable to obtain alternative financing, how the motion benefits the estate and that the transaction is fair and reasonable," the objection states.

"Since any possibility of a turnkey sale has long since disappeared, the debtors admit that the ongoing liquidation of assets will only result in payment of the secured claim of the alleged senior lender, Argonaut Ventures, LLC, and perhaps a marginal distribution to the other secured lender, the U.S. Dept. of Energy," according to the objection.

iStar also says the proposed budget increase benefits only the secured lenders and the estate professionals. The professionals are scheduled to be paid $4.6 million in the next 20 weeks, and the chief restructuring officer is scheduled to receive $860,000, according to court documents.

Solyndra's monthly lease payment for the Milpitas property is $128,842, according to court documents.

When Solyndra stripped out its equipment for sale, it left iStar's 80,000-square-foot facility strewn with scrap, much of which is contaminated with lead, the objection states. There is no budget item for cleaning up the Milpitas site.

U.S. Trustee objection

The trustee objects "to the approval of additional borrowings that are not necessary for the payment of current administrative expenses, absent demonstrable progress with respect to a Chapter 11 plan.

Specifically, the trustee objects to a proposed "catch-up" payment to professionals in week 43 of the proposed budget. Debtors' counsel, the chief restructuring officer, lender's counsel and company counsel on non-bankruptcy matters are scheduled to receive a total of about $1.24 million during the week of June 30, according to court documents.

"Funding and approval of such amounts should be delayed until there is substantive progress in the case, i.e., confirmation and emergence from Chapter 11, rather than just the filing of a plan of reorganization," the objection states.

"Except for the sale of real estate, described by the debtors in the motion as the 'most valuable asset in the estate,' the debtors appear to have completed most of their asset sales and significant future income is doubtful," the trustee states.

The case "has been a liquidation case for many months," and the delay in filing a plan of liquidation "seems inexplicable," the objection states.

Solyndra, a Fremont, Calif.-based manufacturer of cylindrical solar photovoltaic systems for large industrial and commercial rooftops, filed for bankruptcy Sept. 6. Its Chapter 11 case number is 11-12799.

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