On Fisker And Politics

Obama will give a speech today advocating more support for alternative energy vehicles. He wants to set up a (another) Trust Fund to achieve his goal. The TF will be funded by revenues from oil and gas leases. The Prez wants to throw another $2b down the electric car rat hole.

It’s an interesting day for the President to be bring up this idea as there is some evidence that another of Obama’s prior investments is turning into mush. The next Solyndra is setting up to be Fisker.

Fisker is private, so no numbers to look at. Therefore my thoughts on Fisker are just speculation. That said, something is up. The boss and founder of Fisker, Henrik Fisker, left the company yesterday. That’s never a good sign.

If there is to be a problem with Fisker, there will be blow-back to Obama. In 2009 Obama rushed to lend Fisker money. There will now be a lot of disclosure of what went wrong at Fisker. I can’t wait for the details.

The Department of Energy announced the Fisker loans in September of 2009. The original deal was for a total of $528m.

After the announcement there were a number of individual loans made to Fisker by the Federal Financing Bank. These are the details on the individual advances made by the FFB:

5/2010 – $60m

6/2010 – $17m

7/2010 – $16m

8/2010 – $17m

9/2010 – $16m

12/2010 – $20m

1/2011 – $17m

2/2011 – $1om

3/2011 – $9m

4/2011 – $7m

5/2011 – $3m
___________

Total = $192B

Bingo! Only $192m of the $538m that was committed was lent out. Why would that be?

I have no direct knowledge of what happened back in 2011 when the DOE pulled the plug on the balance of the loan advances, but this is unusual. In any loan agreement (including loans made by the FFB) there are Conditions Precedent for draw-downs under an existing loan agreement. For the FFB to stop making loans, there had to be a legal reason; it had to be a covenant violation.

Typical covenants would include things like 1) A minimum net worth ratio, 2) minimum liquidity ratio, 3) revenues, 4) specific milestones of progress, 5) change of management, 6) change of control etc. There is always one provision that is a catchall – Material Adverse Change (MAC).

What was it that caused the change of heart at the DOE? When did it realize that something was “not right”?

The timing is suspicious. What was happening in May of 2011? The answer is that by this time, the DOE knew that Solyndra was going into the tank. The DOE renegotiated its Solyndra loans to allow other lenders in. The DOE agreed to subordinate its loans (a sure sign that something was about to hit a fan). Where the coming losses at Solyndra a factor in setting Fisker adrift?

My take on this? Fisker has a problem. If they do not sell themselves to a Chinese buyer pretty soon, Fisker will be in the headlines. If things go in that direction, the DOE loans will be at risk – another Solyndra might be in the making.

My problem with this is the calendar. Something bad happened sometime around May 2011 when the advances to Fisker were pulled. If there was information about a Fisker problem back then, why was there no disclosure? This is Federal money that was lent to a start-up private company. One would think that the tax payers (and voters) would have had some information about what was happening with their money, no?

Romney tried to nail Obama about the President’s lending policies for alternative energy programs. Mitt waved the Solyndra flag, but no one cared, and it was never a campaign issue. But I do wonder what would have happened if the real reason(s) for pulling the Fisker plug were made public prior to the election. Obama got a pass on his mistake with Solyndra; I think he would not have gotten a second pass if it were known that there was another bad loan on the books.

The questions are, Who knew what? When did they know it? When was this communicated to Obama (if ever)? And if there was a problem that the WH was aware of, why didn’t they disclose it prior to the election?

Lots of speculation by me in this report, so be guided accordingly. I have somewhat of a track record on these things. I was the only one to publish a report that Solyndra was going broke, before it went broke. I’ve got that whiff of rotten eggs again. Link to my report: Government Investment Disaster in the Works??