This excerpt taken from the CY 10-Q filed Nov 7, 2008.
Money Market Funds:
As of September 28, 2008, the Company has classified $25.7 million of its money market funds as Level 3 financial assets. These Level 3 money market funds are related to SunPowers investments in the Reserve Primary Fund and the Reserve International Liquidity Fund (collectively referred to as the "Reserve Funds"). The net asset value for the Reserve Funds fell below $1.00 per share because the funds had investments in Lehman Brothers, which filed for bankruptcy on September 15, 2008. As a result of this event, the Reserve Funds wrote down their investments in Lehman Brothers to zero. SunPower has estimated the loss on the Reserve Funds to be approximately $0.9 million based on an evaluation of the fair value of the securities held by the Reserve Funds and the net asset value that was last published by the Reserve Funds before the funds suspended redemptions. SunPower recorded an impairment charge of $0.9 million in the Condensed Consolidated Statement of Operations for the three months ended September 28, 2008.
SunPower conducted its fair value assessment of the Reserve Funds using Level 2 and Level 3 inputs. Management has reviewed the Reserve Funds' underlying securities portfolios which are substantially comprised of discount notes, certificates of deposit and commercial paper issued by highly-rated institutions. SunPower has used a pricing service to assist in its review of fair value of the underlying portfolios, which estimates fair value of some instruments using proprietary models based on assumptions as to term, maturity dates, rates, credit risk, etc. Normally, SunPower would classify such an investment as Level 2 investments. However, management also evaluated the fair value of its unit interest in the Reserve Funds itself, considering risk of collection, timing and other factors. These assumptions are inherently subjective and involve significant management judgment. As a result, SunPower has classified its holdings in the Reserve Funds as Level 3 investments.
On October 31, 2008, SunPower received a distribution of $11.9 million from the Reserve Funds. SunPower expects that the remaining distribution of $13.8 million from the Reserve Funds will occur over the remaining 12 months as the investments held in the fund mature. While SunPower expects to receive substantially all of its current holdings in the Reserve Funds within the next 12 months, it is possible SunPower may encounter difficulties in receiving distributions given the current credit market conditions. If market conditions were to deteriorate even further such that the current fair value were not achievable, SunPower could realize additional losses in its holdings with the Reserve Funds and distributions could be further delayed.