[Congressional Record Volume 164, Number 92 (Tuesday, June 5, 2018)]
[Senate]
[Pages S2994-S2996]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
SA 2271. Mr. BOOKER submitted an amendment intended to be proposed by
him to the bill H.R. 5515, to authorize appropriations for fiscal year
2019 for military activities of the Department of Defense, for military
construction, and for defense activities of the Department of Energy,
to prescribe military personnel strengths for such fiscal year, and for
other purposes; which was ordered to lie on the table; as follows:
At the end of subtitle I of title VIII, add the following:
SEC. 896. SCALE-UP MANUFACTURING INVESTMENT PROGRAM.
(a) Short Title.--This section may be cited as the ``Scale-
up Manufacturing Investment Company Act of 2018''.
(b) Findings.--Congress finds that--
(1) the strength of the United States manufacturing sector
is critical to the economy and the global competitiveness of
the United States;
(2) United States manufacturers support 17,600,000 jobs in
the United States and account for 12 percent of the gross
domestic product of the United States;
(3) access to capital is essential to growth and innovation
in the manufacturing sector;
(4) small, emerging manufacturers face unique challenges
scaling commercial production in the United States, driving
many young manufacturers to other countries;
(5) structural barriers exist in the United States that
prevent key investments in first-commercial manufacturing
facilities;
(6) a healthy manufacturing sector is essential to
innovation economy of the United States, providing three-
quarters of all private sector research and development,
employing nearly two-thirds of all research and development
workers, and producing the majority of all patents issued;
(7) technology-intensive manufacturing small businesses,
some of which may be start-ups, with the potential to anchor
the next generation of manufacturing production where they
locate, face special challenges in accessing the capital to
move from idea to prototype and into commercial production;
(8) already more capital intensive than software or
services start-ups, manufacturing start-ups and small
businesses face a ``second and wider valley of death'' when
it comes to raising the capital to scale up for commercial
production because of their capital intensity and novel
technology;
(9) a number of countries, including the People's Republic
of China, South Korea, Germany, and Japan, provide publicly
funded incentives to attract these firms, recognizing that
despite the risks, the long-term benefits of establishing
leadership in emerging technology areas are large;
(10) a study of manufacturing technology-intensive start-
ups licensed by the Massachusetts Institute of Technology
found that almost all that scaled up into commercial
production did so overseas largely because of this far more
attractive capital and investment environment for
manufacturing start-ups, which is a huge loss for the future
of manufacturing in the United States;
(11) if the United States loses the first generation of
production for a new technology or manufacturing process,
history suggests that it is an uphill battle once lost to
reclaim that capability here given the unique learning and
know-how acquired during the building of that first factory;
and
(12) to ensure that manufacturing technologies invented in
the United States are ultimately made in the United States
will require addressing the unique capital access challenges
faced by these technology-intensive manufacturing start-ups.
(c) Scale-up Manufacturing Investment Program.--
(1) In general.--Title III of the Small Business Investment
Act of 1958 (15 U.S.C. 681 et seq.) is amended by adding at
the end the following:
``PART D--SCALE-UP MANUFACTURING INVESTMENT COMPANY PROGRAM
``SEC. 399A. DEFINITIONS.
``In this part--
``(1) the term `Associate Administrator' means the
Associate Administrator described in section 201;
``(2) the term `Council' means the Scale-Up Manufacturing
Investment Company Credit Council that may be established
under section 399K;
``(3) the term `participating investment fund' means a
privately managed investment fund licensed under section 399C
to operate under the program;
``(4) the term `private capital' has the meaning given that
term in section 103(9);
``(5) the term `program' means the scale-up manufacturing
investment company program established under section 399B;
``(6) the term `qualifying manufacturing project' means an
investment in a small and emerging manufacturer for the
purposes of building first commercial production facilities,
novel manufacturing capabilities, or the introduction into
production of emerging manufacturing technologies;
``(7) the term `small and emerging manufacturer' means any
advanced manufacturer that does not exceed the size standard
established by the Administrator for the applicable North
American Industry Classification System code under section 3
of the Small Business Act (15 U.S.C. 632); and
``(8) the term `small business concern owned and controlled
by socially and economically disadvantaged individuals' has
the meaning given that term in section 8(d)(3)(C) of the
Small Business Act (15 U.S.C. 637(d)(3)(C)).
``SEC. 399B. ESTABLISHMENT.
``(a) In General.--The Administrator shall establish and
carry out a scale-up manufacturing investment company program
under which the Administrator shall provide leverage to
participating investment funds to support debt and equity
investments in qualifying manufacturing projects of small and
emerging manufacturers in the United States.
``(b) Administration of Program.--The program shall be
administered by the Administrator acting through the
Associate Administrator.
``SEC. 399C. SELECTION OF PARTICIPATING INVESTMENT FUNDS.
``(a) Application for License.--
``(1) Submission of application.--An investment fund
desiring to receive a license to operate under the program
shall submit an application to the Administrator at such time
and in such manner as the Administrator may require.
[[Page S2995]]
``(2) Requirement.--An application submitted under
paragraph (1) shall demonstrate that the investment fund--
``(A) has the requisite minimum private capital raised from
investors; and
``(B) committed to operate under the program as of the date
of submission of the application.
``(3) Status.--Not later than 90 days after the initial
receipt by the Administrator of an application submitted
under paragraph (1), the Administrator shall provide the
applicant with a written report detailing the status of the
application and any requirements remaining for completion of
the application.
``(b) Selection.--
``(1) In general.--Not later than 180 days after the date
on which the Administrator receives an application under
subsection (a), the Administrator shall approve or deny the
application for a license to operate under the program and
notify the applicant of the determination.
``(2) Criteria.--The Administrator shall establish
selection criteria to evaluate applications to operate under
the program, which shall include, at a minimum--
``(A) the proven investment experience of the investment
fund manager;
``(B) the proven, balanced, and positive-investment track
record of a previous investment fund or the principals and
fund performance analysis measured against benchmarks and
peer funds;
``(C) the experience of the investment fund with
investments relating to small manufacturers and emerging
technologies related to advanced manufacturing;
``(D) an evaluation of the use of leverage by the
investment fund managers in past deals;
``(E) evidence indicating a cohesive and effective team and
team dynamic;
``(F) principals with strong reputations;
``(G) record of positive realizations and exits from
previous investments in the investment track record;
``(H) clearly articulated focus, investment thesis,
investment themes, and investment instruments to be used to
capitalize companies; and
``(I) fund structure and economics that reflects standard
practices and industry norms, such as--
``(i) preferred returns to limited partners;
``(ii) general partner carried interest allocations, fees
and vesting schedules;
``(iii) adequate fund infrastructure and supporting back
office services; and
``(iv) evidence of fund raising traction and capability.
``(c) Fees.--
``(1) In general.--The Administration shall prescribe fees
to be paid by each applicant for a license to operate as a
participating investment fund under the program.
``(2) Use of amounts.--Fees collected under this
subsection--
``(A) shall be deposited in the account for salaries and
expenses of the Administration; and
``(B) are authorized to be appropriated solely to cover the
costs of licensing examinations.
``SEC. 399D. PROVISION OF LEVERAGE TO PARTICIPATING
INVESTMENT FUNDS.
``(a) In General.--Not later than 60 days after the date on
which the Administrator approves and issues a license under
section 399C to operate as a participating investment fund
under the program, the Administrator may provide not more
than $1 of leverage for every $1 of private capital raised by
the participating investment fund.
``(b) Maximum Leverage.--The maximum amount of outstanding
leverage made available in any given fiscal year--
``(1) to any participating investment fund may not exceed
$500,000,000; and
``(2) to all participating investment funds in aggregate
may not exceed $1,000,000,000.
``(c) Private Capital Requirement.--
``(1) In general.--The private capital of a participating
investment fund shall be not less than $250,000,000.
``(2) Financial institution investments.--Any national
bank, or any member bank of the Federal Reserve System or
nonmember insured bank to the extent permitted under
applicable State law, may invest in any 1 or more
participating investment funds, or in any entity established
to invest solely in participating investment funds, except
that in no event shall the total amount of such investments
of any such bank exceed 5 percent of the capital and surplus
of the bank.
``(d) Leverage Fee.--The Administrator shall charge and
collect a leverage fee of not more than 5.5 percent and not
less than 3 percent of the face amount of the leverage
issued.
``SEC. 399E. BORROWING POWER.
``(a) In General.--Each participating investment fund shall
have the authority to borrow money and issue debentures and
preferred securities, subject to such limitations and
regulations as the Administration may prescribe.
``(b) Limitation.--Of the leverage provided by the
Administrator to a participating investment fund under
section 399D--
``(1) not less than 70 percent shall be issued as
debentures under subsection (a); and
``(2) not more than 30 percent may be issued as preferred
securities under subsection (a).
``(c) Federal Financing Bank.--The Federal Financing Bank
may acquire a debenture issued by a participating investment
fund company under subsection (a).
``(d) Purchase and Guarantee by SBA.--
``(1) In general.--The Administration may purchase or
guarantee the timely payment of all principal and interest as
scheduled on debentures or preferred securities issued by
participating investment funds under subsection (a), subject
to such limitations and regulations as the Administration may
prescribe.
``(2) Full faith and credit.--The full faith and credit of
the United States is pledged to the payment of all amounts
which may be required to be paid under any guarantee under
this subsection.
``(e) Third-Party Debt.--The Administrator--
``(1) shall not permit a participating investment fund
having outstanding leverage to incur third-party debt that
would create or contribute to an unreasonable risk of default
or loss to the Federal Government; and
``(2) shall permit such participating investment funds to
incur third-party debt only on such terms and subject to such
conditions as may be established by the Administrator, by
regulation or otherwise.
``(f) Calculation of Subsidy Rate.--All fees, interest, and
profits received and retained by the Administration under
this section and section 399D shall be included in the
calculations made by the Director of the Office of Management
and Budget to offset the cost (as that term is defined in
section 502 of the Federal Credit Reform Act of 1990 (2
U.S.C. 661a)) to the Administration of purchasing and
guaranteeing debentures and preferred securities under this
Act.
``SEC. 399F. INVESTMENTS IN SMALL BUSINESS CONCERNS.
``(a) In General.--A participating investment fund shall
use leverage received under section 399D to make debt and
equity investments in small and emerging manufacturers to
carry out qualifying manufacturing projects.
``(b) Limitation.--Not more than 50 percent of the amount
provided by a participating investment fund to a small and
emerging manufacturer under subsection (a) for a qualifying
manufacturing project shall consist of leverage provided to
the participating investment fund under the program.
``(c) Portfolio Management.--A single investment made by a
participating investment fund under subsection (a) may not
exceed 10 percent of the total capital of the participating
investment fund, which includes private capital and any
leverage projected to be provided to the participating
investment fund, if applicable.
``(d) Increased Outreach.--The Administration shall issue
policy directives to provide for enhanced outreach efforts to
increase investments by participating investment funds in--
``(1) a small business concern owned and controlled by
socially and economically disadvantaged individuals; and
``(2) small business concerns owned and controlled by--
``(A) women;
``(B) veterans; and
``(C) individuals with disabilities.
``SEC. 399G. EXAMINATIONS AND VALUATIONS.
``(a) Examinations.--
``(1) In general.--Each participating investment fund shall
be subject to examinations made at the direction of the
Investment Division of the Administration in accordance with
this subsection.
``(2) Assistance of private sector entities.--Examinations
under this subsection may be conducted with the assistance of
a private sector entity that has the qualifications and the
expertise necessary to conduct such examinations.
``(3) Costs.--
``(A) Assessment.--
``(i) In general.--The Administrator may assess the cost of
examinations under this subsection, including compensation of
the examiners, against the participating investment fund
examined.
``(ii) Payment.--Any participating investment fund against
which the Administrator assesses costs under subparagraph (A)
shall pay such costs.
``(B) Deposit of funds.--Funds collected under this
subsection--
``(i) shall be deposited in the account for salaries and
expenses of the Administration; and
``(ii) are authorized to be appropriated solely to cover
the costs of examinations and other program oversight
activities.
``(b) Valuations.--
``(1) Frequency of valuations.--
``(A) In general.--Each participating investment fund shall
submit to the Administrator a written valuation of the loans
and investments of the participating investment fund not less
often than semiannually or otherwise upon the request of the
Administrator, except that any participating investment fund
with no leverage outstanding shall submit such valuations
annually, unless the Administrator determines otherwise.
``(B) Material adverse changes.--Not later than 30 days
after the end of a fiscal quarter of a participating
investment fund during which a material adverse change in the
aggregate valuation of the loans and investments or
operations of the participating investment fund occurs, the
participating investment fund shall notify the Administrator
in writing of the nature and extent of that change.
``(C) Independent certification.--
``(i) In general.--Not less than once during each fiscal
year, each participating investment fund shall submit to the
Administrator the financial statements of the participating
investment fund, audited by an
[[Page S2996]]
independent certified public accountant approved by the
Administrator.
``(ii) Audit requirements.--Each audit conducted under
clause (i) shall include--
``(I) a review of the procedures and documentation used by
the participating investment fund in preparing the valuations
required by this subsection; and
``(II) a statement by the independent certified public
accountant that such valuations were prepared in conformity
with the valuation criteria applicable to the participating
investment fund established in accordance with paragraph (2).
``(2) Valuation criteria.--Each valuation submitted under
this subsection shall be prepared by the participating
investment fund in accordance with valuation criteria, which
shall--
``(A) be established or approved by the Administrator; and
``(B) include appropriate safeguards to ensure that the
noncash assets of a participating investment fund are not
overvalued.
``SEC. 399H. MISCELLANEOUS.
``The Administrator may take such action as set forth in
sections 309, 311, 312, 314, 315, and 316 and an owner
(including a member, partner, or shareholder), officer,
director, employee, agent, or other participant in the
management or conduct of the affairs of a participating
investment fund shall be subject to the requirements of such
sections.
``SEC. 399I. VIOLATIONS; REMOVAL OR SUSPENSION OF MANAGEMENT
OFFICIALS.
``(a) Violations.--If any participating investment fund
violates or fails to comply with any of the provisions of
this part or of regulations prescribed hereunder, all of its
rights, privileges, and franchises derived therefrom may
thereby be forfeited. Before any such participating
investment fund shall be declared dissolved, or its rights,
privileges, and franchises forfeited, any noncompliance with
or violation of this Act shall be determined and adjudged by
a court of the United States of competent jurisdiction in a
suit brought for that purpose in the district, territory, or
other place subject to the jurisdiction of the United States,
in which the principal office of such participating
investment fund is located. Any such suit shall be brought by
the United States at the instance of the Administration or
the Attorney General.
``(b) Suspension of Management Officials.--Using the
procedures for removing or suspending a director or an
officer of a licensee set forth in section 313, the
Administrator may remove or suspend any management official
of a participating investment fund.
``SEC. 399J. REPORTS.
``Each participating investment fund shall, on a semi-
annual basis, provide to the Administrator such information
as the Administrator may require, including--
``(1) information related to the measurement criteria that
the participating investment fund proposed in the application
for the program;
``(2) information on the use of leverage by the
participating investment fund; and
``(3) in each case in which the participating investment
fund makes an investment in a small business concern that is
not a small business concern owned and controlled by socially
and economically disadvantaged individuals, a report on the
number and percentage of employees of the small business
concern who are socially and economically disadvantaged
individuals.
``SEC. 399K. SCALE-UP MANUFACTURING INVESTMENT COMPANY CREDIT
COUNCIL.
``(a) Establishment.--The Administrator may establish a
Scale-Up Manufacturing Investment Company Credit Council,
which, if established, shall consist of 5 members from the
private sector with aggregate and collective experience in
technology development, manufacturing financing, and capital
investment.
``(b) Duties.--The Council, if established, shall advise
the Administrator on carrying out the program, which shall
include--
``(1) providing advice from time to time on advanced scale-
up manufacturing industries; and
``(2) establishing and conducting an annual briefing
beginning not later than 18 months after the date of
enactment of this section.
``SEC. 399L. REGULATIONS.
``The Administrator may issue such regulations as the
Administrator determines necessary to carry out the
provisions of this part in accordance with its purposes.''.
(2) Bank holding company act of 1956.--Section 13(d)(1)(E)
of the Bank Holding Company Act of 1956 (12 U.S.C.
1851(d)(1)(E)) is amended by inserting ``investments in 1 or
more participating investment funds, as defined in section
399A of the Small Business Investment Act of 1958,'' before
``or investments''.
(3) Ineligibility for bankruptcy.--Section 109(b)(2) of
title 11, United States Code, is amended by inserting ``a
participating investment fund as defined in section 399A of
the Small Business Investment Act of 1958,'' before ``credit
union''.
(4) Eligibility for cra credit.--Section 804 of the
Community Reinvestment Act of 1977 (12 U.S.C. 2903) is
amended by adding at the end the following:
``(e) Investments in Participating Investment Funds.--In
assessing and taking into account, under subsection (a), the
record of a financial institution, the appropriate Federal
financial supervisory agency shall consider, as a factor,
investments made in 1 or more participating investment funds
under part D of the Small Business Investment Act of 1958.''.
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