[Federal Register Volume 62, Number 172 (Friday, September 5, 1997)]
[Rules and Regulations]
[Pages 46867-46872]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-23580]
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Rules and Regulations
Federal Register
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Federal Register / Vol. 62, No. 172 / Friday, September 5, 1997 /
Rules and Regulations
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DEPARTMENT OF AGRICULTURE
Rural Telephone Bank
7 CFR Part 1610
Rural Utilities Service
7 CFR Parts 1735, 1737, 1739, and 1746
RIN 0572-AB32
Rural Telephone Bank and Telecommunications Program Loan
Policies, Types of Loans, Loan Requirements
AGENCY: Rural Utilities Service and Rural Telephone Bank, USDA.
ACTION: Final rule.
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SUMMARY: The Rural Utilities Service (RUS) is amending its regulations
to incorporate changes to the telecommunications loan program required
by the 1996 Farm Bill and the regulatory reinvention initiative of the
Vice President's National Performance Review. RUS has reviewed the
regulations concerning the telecommunications program and the Rural
Telephone Bank loan policies and requirements to determine whether they
are necessary, impose the least possible burden consistent with safety
and soundness, and are written in a clear, straightforward manner. As a
result of this review, the RUS telecommunications program is updating
and streamlining its regulations and policy statements. In addition,
this regulation will eliminate some policies and procedures that have
become obsolete.
EFFECTIVE DATE: This regulation is effective on October 6, 1997.
FOR FURTHER INFORMATION CONTACT: Jonathan Claffey, Acting Deputy
Director, Advanced Telecommunications Services Staff, Rural Utilities
Service, 1400 Independence Ave., SW., STOP 1701, Room 2919, South
Building, Washington, DC 20250-1701. Telephone: (202) 720-0530.
Facsimile: (202) 720-2734.
SUPPLEMENTARY INFORMATION:
Classification
This final rule has been determined to be not significant, and,
therefore has not been reviewed by the Office of Management and Budget
under Executive Order 12866.
Civil Justice Reform
This final rule has been reviewed under Executive Order 12988,
Civil Justice Reform. RUS has determined that this final rule meets the
applicable standards provided in Sec. 3. of the Executive Order.
Regulatory Flexibility Act Certification
Pursuant to Sec. 605(b) of the Regulatory Flexibility Act, 5 U.S.C.
605(b), RUS certifies that this final rule will not have a significant
economic impact on a substantial number of small entities. If a rule
has a significant economic impact on a substantial number of small
entities, the Regulatory Flexibility Act requires agencies to analyze
regulatory options that would minimize any significant impact of a rule
on small entities. The application for loans under the RUS
telecommunications program are discretionary, regulatory requirements
will, therefore, apply only to those entities which choose to apply for
funding.
This action is being taken as part of the National Performance
Review program to eliminate excess regulations and to improve the
quality of those that remain in effect. This final rule reduces the
Times Interest Earned Ratio requirement for all borrowers, simplifies
current cash distribution and investment requirements for all
borrowers, and standardizes determination of loan maturity. This final
rule is consistent with RUS's continuing effort to devolve, in
particular, cash management authority to the borrowers. It is also
consistent with the goals of the regulatory reinvention initiative of
the National Performance Review.
Information Collection and Recordkeeping Requirements
The recordkeeping and reporting burden contained in this rule under
OMB control number 0572-0079 is not fully effective until approved by
the Office of Management and Budget (OMB).
Send questions or comments regarding this burden or any other
aspect of these collections of information, including suggestions for
reducing the burden, to F. Lamont Heppe, Jr., Director, Program Support
and Regulatory Analysis, Rural Utilities Service, STOP 1522,
Washington, DC 20250-1522.
National Environmental Policy Act Certification
RUS has determined that this final rule will not significantly
affect the quality of the human environment as defined by the National
Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.). Therefore,
this action does not require an environmental impact statement or
assessment.
Program Affected
The program described by this final rule is listed in the Catalog
of Federal Domestic Assistance Programs under 10.851, Rural
Telecommunications Loans and Loan Guarantees, and 10.582, Rural
Telephone Bank Loans. This catalog is available on a subscription basis
from the Superintendent of Documents, the United States Government
Printing Office, Washington, DC 20402.
Intergovernmental Review
This program is excluded from the scope of Executive Order 12372,
Intergovernmental Consultation. A Notice of Final Rule entitled
Department Programs and Activities Excluded from Executive Order 12372
(50 FR 47034) exempts RUS and Rural Telephone Bank loans and loan
guarantees to governmental and non-governmental entities from coverage
under this Order.
Unfunded Mandate
This rule contains no Federal mandates (under the regulatory
provisions of Title II of the Unfunded Mandate Reform Act) for State,
local, and tribal governments or the private sector. Thus today's rule
is not subject to the requirements of sections 202 and 205 of the
Unfunded Mandate Reform Act.
[[Page 46868]]
Background
On March 7, 1997, at 62 FR 10483, RUS published a proposed rule to
incorporate changes to the telecommunications loan program required by
the Federal Agriculture Improvement and Reform Act of 1996 (Pub. L.
104-127) (1996 Farm Bill) and the regulatory reinvention initiative of
the Vice President's National Performance Review. The amendments as
proposed would reduce regulatory burdens on RUS telecommunications
program borrowers and simplify existing procedures and policies.
RUS received 7 comments regarding the proposed rule, which were
taken into consideration in preparing the final rule. Overall,
respondents generally expressed support for the proposed rule, but made
specific comments. A list of the commenters and comment summaries and
responses follows:
1. Joint comments submitted by: Eastern Rural Telecom Association;
United States Telephone Association; Western Rural Telephone
Association; and National Rural Telecom Association, Washington, DC.
2. Organization for the Promotion and Advancement of Small
Telecommunications Companies, Washington, DC.
3. National Telephone Cooperative Association, Washington, DC.
4. Associated Communications & Research Services, Oklahoma City,
OK.
5. Lackawaxen Telephone Company, Rowland, PA.
6. TDS Telecom, Madison, WI.
7. Kiesling Associates, LLP, West Des Moines, IA.
Sections 1610.6 and 1735.31 Concurrent Bank and RUS Cost-of-Money Loans
Comment Summary: One commenter objected to the proposal to limit
the size of cost-of-money and Rural Telephone Bank (Bank) loans to no
more than 10 percent of lending authority from appropriations in any
fiscal year. The commenter believes no authority exists in the Rural
Electrification Act of 1936, as amended (RE Act), for RUS to make loans
for less than 100 percent of the borrowers needs. If there is a
shortage of cost-of-money and Bank loan funds the solution is to
increase loan levels, not ration available credit among borrowers.
Response: The proposed revision to the regulations reflects the
government's current fiscal and budgetary constraints. To continue
fulfilling RUS's mission of ensuring that rural telecommunications
providers have the means to modernize their networks, to fully effect
the mandated area coverage provision of the RE Act, and to achieve
maximum use of funds available, RUS will limit the loan amount to any
single borrower in a fiscal year to, generally, no more than 10 percent
of the lending authority from appropriations in any fiscal year.
Section 1610.11 Prepayments
Comment Summary: RUS was asked to clarify how new terms of the loan
and remaining economic life will be determined for borrowers requesting
refunding notes. One commenter asked if a borrower prepays 100 percent
of the amount outstanding whether or not the equipment originally
financed is no longer in service, would this be possible under the new
provisions without penalty?
Response: The principal balance of the refunding notes would be the
unpaid principal balance of the original notes associated with the
loan. The term of the refunding notes would match the remaining
composite economic life of the facilities financed, as determined by
the original feasibility study prepared in connection with that
particular loan. All other payment terms, including the rate of
interest on the refunding notes, would remain unchanged. Only those
Bank borrowers subject to the funded reserve or net plant to secured
debt ratio requirements electing to issue refunding notes will not be
required to pay a prepayment premium, if such requirement is contained
in the original note. Barring this, Bank borrowers with notes
containing prepayment premium provisions will still be bound by those
provisions if prepaying a loan.
Section 1735.2 Definitions
Comment Summary: One commenter inquired about the definitions of
total assets and net worth and how existing borrowers (e.g., those
under an older form of mortgage with RUS) that elect to follow the new
allowable distribution calculation under Sec. 1735.46 determine total
assets and net worth.
Response: The definitions for total assets and net worth have been
added to Sec. 1735.2. The new allowable distribution calculation under
Sec. 1735.46 will be based on the total assets and net worth of the
borrower, and not on a consolidated basis.
Section 1735.17 Facilities Financed
Comment Summary: Many commenters objected to RUS adopting the
policy that it will finance only buried plant for all loans unless RUS
determines that buried plant is not economically feasible. Commenters
believe that it is preferable to remain flexible in this uncertain
telecommunications environment. Commenters suggested that, if RUS
determines that it is necessary to implement this proposal, that RUS
define the term economically feasible, and, to conform to its intended
purpose, refer solely to outside plant and not cover all facilities.
Response: The proposed rule reflects the extensive experience of
RUS and consequently does not impose any new requirement on borrowers.
To impose this requirement when the costs would be exorbitant would be
burdensome to borrowers and counterproductive to achieving the
objectives of the RE Act. RUS will only finance those system designs or
facilities that can withstand or are designed to minimize damage caused
by storms and other natural catastrophes, unless an alternate design or
facility is more economically or technically feasible. Economic and
technical feasibility will be determined using total long range
economic costs and risk analysis.
Section 1735.43 Payments on Loans
Comment Summary: Several commenters expressed concern that the
proposal to tie the amortization period for loans to the depreciated
life of facilities financed may not be in the best interest of RUS
borrowers. Commenters believe that there will be many circumstances in
which borrowers will require loan terms that extend 3 years beyond the
expected composite economic life of the facilities financed. In those
circumstances, current RUS regulations are substantially adequate to
protect the interest of the government, and that the proposal to
require the borrower provide additional security (i.e., funded reserve)
for a loan that exceeds the expected composite economic life of the
facilities by more than 3 years is unwarranted and unnecessary. One
commenter felt that the additional security in the form of a funded
reserve should be replaced by a requirement to maintain a net plant to
secured debt ratio of 1.2. Borrowers could certify they have maintained
a 1.2 net plant ratio if they opted for loan amortization periods
different than the standard; thus, simplifying the process and reducing
paperwork and costs to the borrower and RUS.
Response: The final rule establishes that the repayment period will
be based on the expected composite economic life of the facilities
financed. Collateral for RUS loans rests on the value of the facilities
financed. RUS relies on the revenues produced by the facilities
financed for repayment of the loans. Therefore, RUS will continue to
require borrowers electing maturities of more than the depreciated life
plus 3 years maintain a funded reserve to ensure
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adequate security over the life of the loan.
The RE Act sets no minimum length for amortization of loans,
presumably to allow RUS to determine a prudent amortization period.
There are several benefits to tying the amortization period to expected
composite economic life of facilities financed. First, earnings of the
company are based on, among other things, the economic life of the
facilities (depreciation). Second, total interest expense is reduced.
Finally, the government's loan security is enhanced by the loan life
approximating plant life; the economic life of the mortgaged assets
declines at approximately the same pace as the principal balance of the
loan.
It is general practice for lenders making loans for capital assets
to set the amortization period of the loan equal to or less than the
expected economic life of the items financed. Consequently, RUS is not
seeking to establish a unique requirement in this area. This option is
intended to allow the borrower flexibility of extending loan maturity
while allowing the government to maintain adequate security for its
loan. This requirement is also consistent with OMB Circular A-129,
Managing Federal Credit Programs, which in part states that the
maturity offered should be shorter than the estimated economic life of
the asset financed. With telecommunications borrowers facing increasing
competition and the potential for regulatory changes, adequate security
is of critical concern to RUS.
Section 1735.46 Loan Security Documents
Comment Summary: All commenters overwhelmingly supported the
proposed simplification of RUS's policy for determining a borrower's
allowable level of distributions and investments. Several commenters
requested RUS clarify some minor technical aspects of the proposed
formula. One commenter, however, in principle, believes that RUS
borrowers should be able to dividend 100 percent of net earnings
subsequent to loan approval. This would be more in line with private
lenders without adversely affecting loan security.
Response: RUS's new policy regarding investments and distributions
of assets by borrowers will be in all mortgages for loans approved
after the effective date of this final rule. Borrowers that have not
received a loan after the effective date of the final rule may request
the Administrator to apply the new requirements to them; however, once
the decision is made to switch to the new requirements, borrowers may
not revert back to the old method. This new policy is not an
alternative method for borrowers to choose between from year to year.
Further, unlike the former method for determining allowable
distributions whereby adjustments were made to net worth and total
assets based upon, among other things, a borrower's investments in
affiliates, no such adjustments will be factored into the new method
for determining allowable distributions. RUS also modified the
definition of cash distributions to include dividend and capital credit
distributions.
A technical correction not published in the proposed rule will be
made in the final rule to Sec. 1735.32, Guaranteed loans. Presently, to
qualify for a guaranteed loan, among other things, a borrower must have
a projected TIER (including the proposed loan or loans) of at least 1.5
as determined by the feasibility study prepared in connection with the
loan. To be consistent with RUS's previously proposed policy to reduce
the maximum TIER maintenance requirement to no more than 1.5 for all
borrowers receiving any type of loan after the effective date of the
final rule, the TIER eligibility requirement for guaranteed loans will
be reduced to a minimum of 1.2.
List of Subjects
7 CFR Part 1610
Accounting, Loan programs--communications, Reporting and
recordkeeping requirements, Rural areas, Telecommunications.
7 CFR Part 1735
Accounting, Loan programs--communications, Reporting and
recordkeeping requirements, Rural areas, Telecommunications.
7 CFR Part 1737
Accounting, Loan programs--communications, Reporting and
recordkeeping requirements, Rural areas, Telecommunications.
7 CFR Part 1739
Accounting, Guaranteed program, Loan programs--communications,
Reporting and recordkeeping requirements, Rural areas,
Telecommunications.
7 CFR Part 1746
Accounting, Guaranteed program, Loan programs--communications,
Reporting and Recordkeeping requirements, Rural areas,
Telecommunications.
For the reasons set forth in the preamble, and under the authority
of 7 U.S.C. 901 et seq., chapters XVI and XVII of Title 7 of the Code
of Federal Regulations are amended as follows:
CHAPTER XVI
PART 1610--LOAN POLICIES
1. The authority citation for part 1610 continues to read as
follows:
Authority: 7 U.S.C. 941 et seq.; Pub. L. 103-354, 108 Stat. 3178
(7 U.S.C. 6941, et seq.).
2. In Sec. 1610.6, new paragraph (d) is added to read as follows:
Sec. 1610.6 Concurrent Bank and RUS cost-of-money loans.
* * * * *
(d) Generally, no more than 10 percent of lending authority from
appropriations in any fiscal year for Bank and RUS cost-of-money loans
may be loaned to a single borrower. The Bank will publish by notice in
the Federal Register the dollar limit that may be loaned to a single
borrower in that particular fiscal year based on approved Bank and RUS
lending authority.
3. In Sec. 1610.11, a new paragraph (c) is added to read as
follows:
Sec. 1610.11 Prepayments.
* * * * *
(c) Borrowers that qualify to issue a refunding note or notes in
accordance with 7 CFR 1735.43, Payments on loans, shall not be required
to pay a prepayment premium on all payments made in accordance with the
new payment schedule.
CHAPTER XVII
PART 1735--GENERAL POLICIES, TYPES OF LOANS, LOAN REQUIREMENTS--
TELECOMMUNICATIONS PROGRAM
1. The part heading for part 1735 is revised as set forth above.
1a. The authority citation for part 1735 is revised to read as
follows:
Authority: 7 U.S.C. 901 et seq., 1921 et seq.; Pub. L. 103-354,
108 Stat. 3178 (7 U.S.C. 6941 et seq.).
2. In Sec. 1735.2, the definition of Construction fund is amended
by removing the reference ``See 7 CFR part 1758.'', the definitions for
Adjusted assets and Adjusted net worth are removed, and new definitions
Cash distribution, Net worth, and Total assets are added in
alphabetical order to read as follows:
Sec. 1735.2 Definitions.
* * * * *
Cash distribution means investments, guarantees, extensions of
credit,
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advances, loans, non-affiliated company joint ventures, affiliated
company investments, and dividend and capital credit distributions. Not
included in this definition are qualified investments (see 7 CFR part
1744, subpart D).
* * * * *
Net worth means the sum of the balances of the following accounts
of the borrower:
------------------------------------------------------------------------
Account names Number
------------------------------------------------------------------------
(1) Capital stock............................................ 4510
(2) Additional paid-in capital............................... 4520
(3) Treasury stock........................................... 4530
(4) Other capital............................................ 4540
(5) Retained earnings........................................ 4550
------------------------------------------------------------------------
Note: For nonprofit organizations, owners' equity is shown in
subaccounts of 4540 and 4550. All references regarding account numbers
are to the Uniform System of Accounts (47 CFR part 32).
* * * * *
Total assets means the sum of the balances of the following
accounts of the borrower:
------------------------------------------------------------------------
Account names Number
------------------------------------------------------------------------
(1) Current assets........................ 1100s through 1300s.
(2) Noncurrent Assets..................... 1400s through 1500s.
(3) Total telecommunications plant........ 2001 through 2007.
(4) Less: Accumulated depreciation........ 3100 through 3300s.
(5) Less: Accumulated amortization........ 3400 through 3600s.
------------------------------------------------------------------------
Note: All references regarding account numbers are to the Uniform System
of Accounts (47 CFR part 32).
3. In Sec. 1735.3, the first sentence is revised to read as
follows:
Sec. 1735.3 Availability of forms.
Single copies of RUS forms and publications cited in this part are
available from Program Support Regulatory Analysis, Rural Utilities
Service, STOP 1522, 1400 Independence Ave., SW., Washington, DC 20250-
1522. * * *
4. In Sec. 1735.17, paragraph (c) is revised to read as follows:
Sec. 1735.17 Facilities financed.
* * * * *
(c) RUS will not make any type of loan to finance the following
items:
(1) Station apparatus (including PBX and key systems) not owned by
the borrower and any associated inside wiring;
(2) Certain duplicative facilities, see Sec. 1735.12;
(3) Facilities to serve subscribers outside the local exchange
service area of the borrower unless those facilities are necessary to
furnishing or improving telecommunications service within the
borrower's service areas;
(4) Facilities to provide service other than 1-party; and
(5) System designs or facilities to provide service that cannot
withstand or are not designed to minimize damage caused by storms and
other natural catastrophes, including, but not limited to hurricanes,
floods, tornadoes, mudslides, lightning, windstorms, hail, fire, and
smoke, unless an alternate design or facility for modern
telecommunications is more economically or technically feasible.
Economic and technical feasibility will be determined using total long
range economic costs and risk analysis.
* * * * *
5. In Sec. 1735.22, paragraph (g) is redesignated as new paragraph
(i), paragraph (f) is revised, and new paragraphs (g) and (h) are added
to read as follows:
Sec. 1735.22 Loan security.
* * * * *
(f) For purposes of determining compliance with TIER requirements,
unless a borrower whose existing mortgage contains TIER maintenance
requirements notifies RUS in writing differently, RUS will apply the
requirements described in paragraph (g) of this section to the borrower
regardless of the provisions of the borrower's existing mortgage.
(g) For loans approved after October 6, 1997 loan contracts and
mortgages covering hardship loans, RUS cost-of-money loans, RTB loans,
and guaranteed loans will contain a provision requiring the borrower to
maintain a TIER of at least 1.0 during the Forecast Period. At the end
of the Forecast Period, the borrower shall be required to maintain, at
a minimum, a TIER at least equal to the projected TIER determined by
the feasibility study prepared in connection with the loan, but at
least 1.0 and not greater than 1.5.
(h) Nothing in this section shall affect any rights of supplemental
lenders under the RUS mortgage, or other creditors of the borrower, to
limit a borrower's TIER requirement to a level above that established
in paragraph (g) of this section.
* * * * *
6. In Sec. 1735.31, paragraphs (d) and (e) are redesignated as new
paragraphs (e) and (f), and new paragraph (d) is added to read as
follows:
Sec. 1735.31 RUS cost-of-money and RTB loans.
* * * * *
(d) Generally, no more than 10 percent of lending authority from
appropriations in any fiscal year for RUS cost-of-money and RTB loans
may be loaned to a single borrower. RUS will publish by notice in the
Federal Register the dollar limit that may be loaned to a single
borrower in that particular fiscal year based on approved RUS and RTB
lending authority.
* * * * *
7. In Sec. 1735.32, the first sentence of paragraph (b), and
paragraph (c) are revised to read as follows:
Sec. 1735.32 Guaranteed loans.
* * * * *
(b) Requirements. To qualify for a guaranteed loan, a borrower must
have a projected TIER (including the proposed loan or loans) of at
least 1.2 as determined by the feasibility study prepared in connection
with the loan. * * *
(c) Net worth requirements. RUS generally requires that borrowers
seeking guaranteed loans have a net worth in excess of 20 percent of
assets. RUS will, however, consider loan guarantees for borrowers with
a net worth less than 20 percent.
* * * * *
8. Section 1735.33 is added to read as follows:
Sec. 1735.33 Variable interest rate loans.
After June 10, 1991, and prior to November 1, 1993, RUS made
certain variable rate loans at interest rates less than 5 percent but
not less than 2 percent. For those borrowers that received variable
rate loans, this section describes the method by which interest rates
are adjusted. The interest rate used in determining feasibility is the
rate charged to the borrower until the end of the Forecast Period for
that loan. At the end of the Forecast Period, the interest rate for the
loan may be annually adjusted by the Administrator upward to a rate not
greater than 5 percent, or downward to a rate not less than the rate
determined in the feasibility study on which the loan was based, based
on the borrower's ability to pay debt service and maintain a minimum
TIER of 1.0. Downward and upward adjustments will be rounded down to
the nearest one-half or whole percent. To make this adjustment,
projections set forth in the loan feasibility study will be revised
annually by RUS (beginning within four months after the end of the
Forecast Period) to reflect updated revenue and expense factors based
on the borrower's current operating condition. Any such adjustment will
be effective on July 1 of the year in which the adjustment was
determined. If the Administrator determines that the borrower is
capable of meeting the
[[Page 46871]]
minimum TIER requirements of Sec. 1735.22(f) at a loan interest rate of
5 percent on a loan made as described in this section, then the loan
interest rate shall be fixed, for the remainder of the loan repayment
period, at the standard interest rate of 5 percent.
9. In Sec. 1735.43, the section heading is revised, paragraph (a)
is revised, paragraph (b) is redesignated as new paragraph (f), and new
paragraphs (b) through (e) are added to read as follows:
Sec. 1735.43 Payments on loans.
(a) Except as described in this paragraph (a), RUS loans approved
after October 6, 1997 must be repaid with interest within a period
that, rounded to the nearest whole year, equals the expected composite
economic life of the facilities to be financed, as calculated by RUS;
expected composite economic life means the depreciated life plus three
years. The expected composite economic life shall be based on the
depreciation rates for the facilities financed by the loan. In states
where the borrower must obtain state regulatory commission approval of
depreciation rates, the depreciation rates used shall be the rates
currently approved by the state commission or rates for which the
borrower has received state commission approval. In cases where a state
regulatory commission does not approve depreciation rates, the expected
composite economic life shall be based on the most recent median
depreciation rates published by RUS for all borrowers (see 7 CFR
1737.70). Borrowers may request a repayment period that is longer or
shorter than the expected composite economic life of the facilities
financed. If the Administrator determines that a repayment period based
on the expected composite economic life of the facilities financed is
likely to cause the borrower to experience hardship, the Administrator
may agree to approve a period longer than requested. A shorter period
may be approved as long as the Administrator determines that the loan
remains feasible.
(b) Borrowers with RTB loans approved after October 6, 1997 with a
maturity that exceeds the expected composite economic life of the
facilities to be financed by the loan by a period of more than three
years, release of funds included in the loan shall be conditioned upon
the borrower establishing and maintaining, pursuant to a plan approved
by RUS, a funded reserve in such an amount that the balance of the
reserve plus the value of the facilities less depreciation shall at all
times be at least equal to the remaining principal payments on the
loan. Funding of the reserve must begin within one year of approval of
release of funds and must continue regularly over the expected
composite economic life of the facilities financed.
(c) Borrowers that have demonstrated to the satisfaction of the
Administrator an inability to maintain the funded reserve or net plant
to secured debt ratio requirements, if any, contained in their
mortgage, may elect to replace notes with an original maturity that
exceeded the composite economic life of the facilities financed with
notes bearing a shorter maturity approximating the expected composite
economic life of the facilities financed, if this will result in a
shorter maturity for the loan. The principal balance of the notes
(hereinafter in this section called the ``refunding notes'') issued to
refund and substitute for the original notes would be the unpaid
principal balance of the original notes. The refunding notes would
mature at a date no later than the remaining economic life of the
facilities financed by the loan, plus three years, as determined by the
original feasibility study prepared in connection with the loan.
Interest on the original note must continue to be paid through the
closing date. All other payment terms, including the rate of interest
on the refunding notes, would remain unchanged. Disposition of funds in
the funded reserve will be determined by RUS at the closing date. RUS
will notify the borrower in writing of the amendment of loan payment
requirements and the terms and conditions thereof.
(d) A borrower qualifying under paragraph (c) of this section shall
not be required to pay a prepayment premium on such portion of the
payments under its new notes as exceeds the payments required under the
notes being replaced.
(e) To apply for refunding notes, borrowers must send to the Area
Office the following:
(1) A certified copy of a board resolution requesting an amendment
of loan payment requirements and that certain notes be replaced;
(2) If applicable, evidence of approval by the regulatory body with
jurisdiction over the telecommunications service provided by the
borrower to issue refunding notes; and
(3) Such other documents as may be required by the RUS.
* * * * *
10. In Sec. 1735.46, paragraphs (b), (c) and (d) are revised,
paragraphs (e) and (f) are removed, and paragraphs (g) and (h) are
redesignated as paragraphs (e) and (f) to read as follows:
Sec. 1735.46 Loan security documents.
* * * * *
(b) Loan security documents of borrowers with loans approved after
October 6, 1997 will provide limits on allowable cash distributions in
any calendar year as follows:
(1) No more than 25 percent of the prior calendar year's net
earnings or margins if the borrower's net worth is at least 1 percent
of its total assets after the distribution is made;
(2) No more than 50 percent of the prior calendar year's net
earnings or margins if the borrower's net worth is at least 20 percent
of its total assets after the distribution is made;
(3) No more than 75 percent of the prior calendar year's net
earnings or margins if the borrower's net worth is at least 30 percent
of its total assets after the distribution is made; or
(4) No limit on distributions if the borrower's net worth is at
least 40 percent of its total assets after the distribution is made.
(c) Borrowers that have not received a loan after October 6, 1997
may request the Administrator to apply these requirements to them.
Borrowers may request in writing that RUS substitute the new
requirements described in paragraphs (b)(1) through (b)(4) of this
section. Upon request by the borrower, the provisions of the borrower's
loan documents restricting cash distributions or investments shall not
be enforced to the extent that such provisions are inconsistent with
this section.
(d) Rural development investments meeting the criteria set forth in
7 CFR part 1744, subpart D, will not be counted against a borrower's
allowable cash distributions in any calendar year (7 U.S.C. 926).
* * * * *
Sec. 1735.60 [Amended]
11. Sec. 1735.60, paragraph (a) introductory text is amended by
removing the reference ``(see 7 CFR part 1758)'' and paragraph (a)(3)
is removed.
Sec. 1735.76 [Amended]
12. Sec. 1735.76, the second ``or'' is removed and the word ``of''
is added in its place.
PART 1737--PRE-LOAN POLICIES AND PROCEDURES COMMON TO GUARANTEED
TELECOMMUNICATIONS LOANS
13. The part heading for part 1737 is revised as set forth above.
14. The authority citation for part 1737 is revised to read as
follows:
Authority: 7 U.S.C. 901 et seq., 1921 et seq.; Pub. L. 103-354,
108 Stat. 3178 (7 U.S.C. 6941 et. seq.).
[[Page 46872]]
Sec. 1737.70 [Amended]
15. In Sec. 1737.70, paragraph (d) is removed and reserved.
PART 1739--[REMOVED]
16. Part 1739 is removed.
PART 1746--[REMOVED]
17. Part 1746 is removed.
Dated: August 28, 1997.
Inga Smulkstys,
Acting Under Secretary, Rural Development.
[FR Doc. 97-23580 Filed 9-4-97; 8:45 am]
BILLING CODE 3410-15-P