Analysis: Solyndra may face tough task attracting big bids

Tue Nov 15, 2011 5:16pm EST

(Reuters) - Solyndra LLC, the solar panel maker that went bankrupt after accepting a big U.S. government loan, may have a tough time drumming up sizable bids in an auction of its business this week.

Tepid bidding could reinforce arguments by critics who say the Obama administration rushed a $535 million loan guarantee for Solyndra without properly vetting the company's true value and viability. Active bidding would help generate more money to repay the government.

The loan guarantee is now being investigated by Congress, and the company's headquarters have been raided by the Federal Bureau of Investigation.

A court-supervised auction was ordered after the company filed for bankruptcy in Delaware in September.

The company's adviser overseeing the sale process, Eric Carlson of Imperial Capital LLC, said in an email that he expects to receive bids by Wednesday night's deadline and to hold an auction on Friday. Others have their doubts.

"I would be surprised if they get meaningful bids for those assets," said a source who was invited to bid. This person, who declined to be identified because auction process is ongoing, said Solyndra's business was so specialized it would be hard to sell in such a rushed process.

Some industry analysts have said for years the company's technology, which applies photovoltaic material on cylindrical tubes, was flawed and untested.

"Solar companies are very hard to sell," said Scott Victor of SSG Capital, which tried to find a buyer for another bankrupt solar company, Stirling Energy Systems. "There is just too much photovoltaic being made in China and there are allegations and claims that it is dumping into the U.S."

In addition to Stirling Energy Systems, Evergreen Solar Inc and SpectraWatt Inc are among the U.S. solar companies that have filed for bankruptcy in recent months.

None of them found a buyer for the entire business.

GOVERNMENT CREDITOR

The company has said it hopes to find a "turnkey" buyer who can step in, restart production and rehire some of the company's 1,000 idled workers.

If the company does not get bids by Wednesday's deadline, it may switch to a backup plan and auction its intellectual property, real estate and equipment separately, according to another source close to the sale.

Selling the assets separately would end any hopes of reviving Solyndra, which was visited by President Barack Obama last year. The company was the first to receive a loan guarantee under an advanced clean energy program created in 2005 and was painting a rosy picture about its prospects as recently as July.

Solyndra estimated it was worth $859 million at the start of this year and filed for bankruptcy with $783.8 million in debt. The government is second in line to be repaid, after an investor who is owed about $70 million. The company's lawyers and advisers have said in court that it is unlikely the government will be repaid in full.

Solyndra's sale of non-essential equipment earlier this month offered hope that selling parts separately might generate active bidding, according to the source close to the sale. The company raised about $6 million in what amounted to a garage sale of everything from high-end microscopes to stationery.

If there are no bidders for the entire company, a fall-back plan would likely have to be put in place quickly.

Solyndra's advisers have said they are concerned about burning through the company's unrestricted cash, which was down to $2.5 million on October 1. The company used $1.3 million for operations in September, according to most recent figures.

BIDDING PROCESS

Imperial, which is overseeing the sale, has reached out to more than 100 potential bidders, according to court testimony. Not all of those contacted would be "turnkey" buyers.

One source at a liquidator said Imperial contacted the firm to test interest in bidding. Liquidators specialize in unloading equipment and real estate, and holding going-out-of-business sales.

One consultant for renewable energy companies said potential bidders had sought his advice on Solyndra but were concerned about the difficulty of shipping Solyndra's fragile panels and the reluctance of banks to provide loans for installing the panels.

"I have spoken to people who were thinking about this, but I haven't seen any takers," said the consultant, who declined to be identified because of his firm's work with potential bidders. (Reporting by Tom Hals in Wilmington, Delaware; Additional reporting by Roberta Rampton in Washington, Nichola Groom in Los Angeles and Dan Levine in San Francisco; Editing by Martha Graybow and Steve Orlofsky)