The bit about Kaiser seemed a bit naive: “The fact is that if Soly had made 20 billion dollars, [George Kaiser] would receive —– zero. The foundation is a 501(c)(3) non-profit entity, and subject to strict controls by both state and federal law on the purposes that they can engage their assets for. It has a fiduciary responsibility that does not include benefiting [George Kaiser]. For example, everyone knows that there would be a world of difference in classifying an investment from Bill Gates, and one from the Bill and Melinda Gates Foundation ”
501(c)(3)s are precluded from substantial legislative lobbying and from any campaign activity, but they can lobby the executive, engage in some legislative lobying and can be organized with officers and directors that share the values of the funding source. The charity can pay their family and friends good salaries.
I don’t believe 501(c)(3)s are subject to strict external controls, at the state or federal level. People are starting to think that should change that, as they notice larger and larger slices of the economy are controlled by tax exempt organizations, ranging from hospitals to megachurches. And the line between charity and industry is becoming so blurred that I guess a solar power start-up is a charity.
And the Gates Foundation is often criticized for barely being a charity, as opposed to an investing house and job security for the Gates family.
I wish the writer would do a chronology; there appear to have been a number of cramdown/ dilution & whipeout of equity events, more so than I thought. The first cramdown may have happened in June of 2010 (Obama spoke at Solyndra on 5/26/2010): “And then the June cramdown occurs, and Solyndra loses a massive amount of technical talent in the next three months.”
After I don’t know how many more cramdowns, the choices are bleak:
“The [government’s] decision was: subordinate and give up “veto”, or they could have killed the DJF deal and walked away with 5 cents on the dollar in foreclosure. … By taking the commands of the “last dollar’ at the table, they basically said that we will give up that last 5 cents to try and let SOLY get going. And I really do believe that the strides that SOLY took between last May and now were actually quite good. So I wouldn’t say that DOE got outfoxed, they got outmuscled by the “last dollars in the door” (as happens every single time)”
I know there are those who consider me a prick for being forthright. But I read the Krasting piece – and this is my business – and have some issues.
Mr. Krasting clearly has above average understanding of financial matters given his background, but there are gaping holes…..I’m just going to walk down the path paragraph by paragraph.
1. The investment banker IPO decline: duh. Banker speak for “we won’t get sued for bringing to market a dead bang loser.”
2. Are we to believe the Board deferred to an investment banker whether or not to invest in Fab#2? Who’s running the show?
3. Kaiser. It does put Kaiser in a different light that he’s a 501 c 3 – but my suspicious mind thinks that’s a bit too cute. See also, PD.
4. I have only seen financials quoted in a 2007 – 2009 time frame. But they were losing $250MM to $115MM a year profit (separate from capital for WC or plant) Hence, the $600MM in equity was blown through. One can only surmise that the Nordbank loan was an asset based, prctically a “loan to liquidate” situation. This patient was a dead man walking. But a loan was made?
5. The use of the word “cramdown” is overused. Equity was vaporised. Senior securities should have become equity to the degree of their tolerance.
6. Say what mf????!!! Factoring of receivables for cash flow considerations is a routine, although not good, financial practice to create liquidity. But selling your inventory? Say what, mf???!!!
And to a “SPV”????????? And the DOE makes a loan AFTER this??!! I’d love to see the Board minutes, legal docs and opinion of counsel on this. Let me get this straight. The working capital assets of a business are sold to a “SPV” leaving the operating assets to generate a profit. And the DOE makes a sub loan to the WC-less operating entity?? There are only two states of the world here: the manager Krasting quotes simply has it wrong, or someone is going to jail. Maybe the operating entity got cash. But the problem is – why do you sell your inventory? WTF. That’s what YOU sell as an enterprise.
7. Sales were going to double. Right. And my unit is 12 inches long.
8. “Last dollar.” Completely bassackward. There was no equity, and they aren’t the “last dollar.” The seniors are. It is true that when a senior claimant looks at a situation and says, “well, if I liquidate hard collateral or enterprise value I only get 5 cents, I might as well play for the futures” the juniors have negotiating power. But the seniors don’t subordinate, they take the equity upside before all the previous juniors……….and generally a Board seat (not “observation rights”) Say, preferred stock, with a coupon. At best this is incompetance on the part of DOE, at worst, slimey. One wonders the political pressures.
9. What is described late in the post is a “rights offering.” That is, if you have an equity stake and a dilution financing is about to occur you have the right to put in fresh money to maintain your ownership position. What is odd is the manager’s notion of concerns about those who were “crammed down.” Would need to know the specifics………..but the smell of the sewer keeps rising.
10.GC LOL, as they say. When the business guys are thrown out, and a lawyer is put in charge, you know the party is over, and its a mop up action to preserve capital. And when was the loan made?? (snicker)
The Obama Administration can only hope to obfuscate their way through this, because there are only so many private equity guys out here to look at it and belly laugh at the apparent fact set. But with friends in the media, politics being what it is, and general public apathy, they probably will get away with it. But this is one of the either crookedist or most bufoonish events I’ve ever seen.
There are only two states of the world here: the manager Krasting quotes simply has it wrong, or someone is going to jail.
I think that last part should read, “or someone SHOULD go to jail.” Holder is going to bury this crap so deep it will never fertilize anything, much less stink up a public space.
Icepick, I’m not that cynical. Half of this story is within the Dept. of Energy and House Republicans have oversight to press DOE for answers. DOE may even have an incentive to finger Solyndra for criminal misconduct to protect itself.
And you don’t think the DOE takes its orders from its masters at the WH? At best this will become another White Water, in which years of stalling let’s the important players off the hook.
But let’s use a more recent example: How many prosecutions have there been for financial misconduct on Wall Street by this Administration? I think they prosecuted one guy in NY for signing a liar’s loan for a house he was going to live in. Where are the prosecutions for the guys that fucked up in the big places, like AIG, BofA, Countrywide, S&P, Moody’s, Fitch and CITI, to name a few? Oh, wait, CITI isn’t going to get prosecuated for anything because one of the big shots there has all his cronies and proteges working in the Administration. BofA is safe because Warren B. owns one ear of the President exclusively. (Even billionaires usually have to do a time share deal for an ear, but not Warren. The “B” is for BIG TIME, baby!)
Icepick, no I don’t think the DOE takes orders from the WH. We’ve already seen the permanent bureaucracy push back against the administration when it claimed that it didn’t try to influence the project. The permanent bureaucracy is sentient and has its own interests to protect, a key one being not to be made to look a fool. I think DOE will identify outsider-political influence, and if it has evidence that Solyndra misrepresented or concealed anything, it will cough it up as well.
We’ll see. But I’d bet 50 million quatloos that DOE ultimately bows before the Administration. After all, the Administration can always use the threat of the budget cutting ax to bring them to heel. “You know those Republicans in Congress hate the DOE, especially the TPers. If you want you department to live, you’ll take a nice big bite of this shit sandwich, like good little boys and girls, or we’ll recommend your section to the Super Duper Budget Committee*.”
As a lawyer I’m sure you understand better than I the term: “fraud, gross negligence or willful misconduct.” Especially as it pertains to protection under the “business judgment rule.”
As a professional investor, I happen to understand what gross negligence or willful misconduct means in the context of investing.
I can tell you unequivocally, based upon what has come to light (and having thought – “what could be exculpatory?” and come up with almost nothing) that this is so stinky as to make excuses simply ludicrous.
This is abuse of power. Its both gross negligence and willful misconduct IMHO.
The bit about Kaiser seemed a bit naive: “The fact is that if Soly had made 20 billion dollars, [George Kaiser] would receive —– zero. The foundation is a 501(c)(3) non-profit entity, and subject to strict controls by both state and federal law on the purposes that they can engage their assets for. It has a fiduciary responsibility that does not include benefiting [George Kaiser]. For example, everyone knows that there would be a world of difference in classifying an investment from Bill Gates, and one from the Bill and Melinda Gates Foundation ”
501(c)(3)s are precluded from substantial legislative lobbying and from any campaign activity, but they can lobby the executive, engage in some legislative lobying and can be organized with officers and directors that share the values of the funding source. The charity can pay their family and friends good salaries.
I don’t believe 501(c)(3)s are subject to strict external controls, at the state or federal level. People are starting to think that should change that, as they notice larger and larger slices of the economy are controlled by tax exempt organizations, ranging from hospitals to megachurches. And the line between charity and industry is becoming so blurred that I guess a solar power start-up is a charity.
And the Gates Foundation is often criticized for barely being a charity, as opposed to an investing house and job security for the Gates family.
I wish the writer would do a chronology; there appear to have been a number of cramdown/ dilution & whipeout of equity events, more so than I thought. The first cramdown may have happened in June of 2010 (Obama spoke at Solyndra on 5/26/2010): “And then the June cramdown occurs, and Solyndra loses a massive amount of technical talent in the next three months.”
After I don’t know how many more cramdowns, the choices are bleak:
“The [government’s] decision was: subordinate and give up “veto”, or they could have killed the DJF deal and walked away with 5 cents on the dollar in foreclosure. … By taking the commands of the “last dollar’ at the table, they basically said that we will give up that last 5 cents to try and let SOLY get going. And I really do believe that the strides that SOLY took between last May and now were actually quite good. So I wouldn’t say that DOE got outfoxed, they got outmuscled by the “last dollars in the door” (as happens every single time)”
If I might……….
I know there are those who consider me a prick for being forthright. But I read the Krasting piece – and this is my business – and have some issues.
Mr. Krasting clearly has above average understanding of financial matters given his background, but there are gaping holes…..I’m just going to walk down the path paragraph by paragraph.
1. The investment banker IPO decline: duh. Banker speak for “we won’t get sued for bringing to market a dead bang loser.”
2. Are we to believe the Board deferred to an investment banker whether or not to invest in Fab#2? Who’s running the show?
3. Kaiser. It does put Kaiser in a different light that he’s a 501 c 3 – but my suspicious mind thinks that’s a bit too cute. See also, PD.
4. I have only seen financials quoted in a 2007 – 2009 time frame. But they were losing $250MM to $115MM a year profit (separate from capital for WC or plant) Hence, the $600MM in equity was blown through. One can only surmise that the Nordbank loan was an asset based, prctically a “loan to liquidate” situation. This patient was a dead man walking. But a loan was made?
5. The use of the word “cramdown” is overused. Equity was vaporised. Senior securities should have become equity to the degree of their tolerance.
6. Say what mf????!!! Factoring of receivables for cash flow considerations is a routine, although not good, financial practice to create liquidity. But selling your inventory? Say what, mf???!!!
And to a “SPV”????????? And the DOE makes a loan AFTER this??!! I’d love to see the Board minutes, legal docs and opinion of counsel on this. Let me get this straight. The working capital assets of a business are sold to a “SPV” leaving the operating assets to generate a profit. And the DOE makes a sub loan to the WC-less operating entity?? There are only two states of the world here: the manager Krasting quotes simply has it wrong, or someone is going to jail. Maybe the operating entity got cash. But the problem is – why do you sell your inventory? WTF. That’s what YOU sell as an enterprise.
7. Sales were going to double. Right. And my unit is 12 inches long.
8. “Last dollar.” Completely bassackward. There was no equity, and they aren’t the “last dollar.” The seniors are. It is true that when a senior claimant looks at a situation and says, “well, if I liquidate hard collateral or enterprise value I only get 5 cents, I might as well play for the futures” the juniors have negotiating power. But the seniors don’t subordinate, they take the equity upside before all the previous juniors……….and generally a Board seat (not “observation rights”) Say, preferred stock, with a coupon. At best this is incompetance on the part of DOE, at worst, slimey. One wonders the political pressures.
9. What is described late in the post is a “rights offering.” That is, if you have an equity stake and a dilution financing is about to occur you have the right to put in fresh money to maintain your ownership position. What is odd is the manager’s notion of concerns about those who were “crammed down.” Would need to know the specifics………..but the smell of the sewer keeps rising.
10.GC LOL, as they say. When the business guys are thrown out, and a lawyer is put in charge, you know the party is over, and its a mop up action to preserve capital. And when was the loan made?? (snicker)
The Obama Administration can only hope to obfuscate their way through this, because there are only so many private equity guys out here to look at it and belly laugh at the apparent fact set. But with friends in the media, politics being what it is, and general public apathy, they probably will get away with it. But this is one of the either crookedist or most bufoonish events I’ve ever seen.
There are only two states of the world here: the manager Krasting quotes simply has it wrong, or someone is going to jail.
I think that last part should read, “or someone SHOULD go to jail.” Holder is going to bury this crap so deep it will never fertilize anything, much less stink up a public space.
Icepick, I’m not that cynical. Half of this story is within the Dept. of Energy and House Republicans have oversight to press DOE for answers. DOE may even have an incentive to finger Solyndra for criminal misconduct to protect itself.
And you don’t think the DOE takes its orders from its masters at the WH? At best this will become another White Water, in which years of stalling let’s the important players off the hook.
But let’s use a more recent example: How many prosecutions have there been for financial misconduct on Wall Street by this Administration? I think they prosecuted one guy in NY for signing a liar’s loan for a house he was going to live in. Where are the prosecutions for the guys that fucked up in the big places, like AIG, BofA, Countrywide, S&P, Moody’s, Fitch and CITI, to name a few? Oh, wait, CITI isn’t going to get prosecuated for anything because one of the big shots there has all his cronies and proteges working in the Administration. BofA is safe because Warren B. owns one ear of the President exclusively. (Even billionaires usually have to do a time share deal for an ear, but not Warren. The “B” is for BIG TIME, baby!)
Icepick, no I don’t think the DOE takes orders from the WH. We’ve already seen the permanent bureaucracy push back against the administration when it claimed that it didn’t try to influence the project. The permanent bureaucracy is sentient and has its own interests to protect, a key one being not to be made to look a fool. I think DOE will identify outsider-political influence, and if it has evidence that Solyndra misrepresented or concealed anything, it will cough it up as well.
We’ll see. But I’d bet 50 million quatloos that DOE ultimately bows before the Administration. After all, the Administration can always use the threat of the budget cutting ax to bring them to heel. “You know those Republicans in Congress hate the DOE, especially the TPers. If you want you department to live, you’ll take a nice big bite of this shit sandwich, like good little boys and girls, or we’ll recommend your section to the Super Duper Budget Committee*.”
* Or whatever the next iteration is called.
PD –
As a lawyer I’m sure you understand better than I the term: “fraud, gross negligence or willful misconduct.” Especially as it pertains to protection under the “business judgment rule.”
As a professional investor, I happen to understand what gross negligence or willful misconduct means in the context of investing.
I can tell you unequivocally, based upon what has come to light (and having thought – “what could be exculpatory?” and come up with almost nothing) that this is so stinky as to make excuses simply ludicrous.
This is abuse of power. Its both gross negligence and willful misconduct IMHO.