[Federal Register Volume 66, Number 154 (Thursday, August 9, 2001)]
[Rules and Regulations]
[Pages 41755-41772]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-19981]



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  Federal Register / Vol. 66, No. 154 / Thursday, August 9, 2001 / 
Rules and Regulations  

[[Page 41755]]



DEPARTMENT OF AGRICULTURE

Rural Utilities Service

7 CFR Part 1744

RIN 0572-AB48


Post-Loan Policies and Procedures Common to Guaranteed and 
Insured Loans

AGENCY: Rural Utilities Service, USDA.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: Recent changes in the telecommunications industry, including 
deregulation and technological developments, have caused Rural 
Utilities Service (RUS) borrowers and other organizations providing 
telecommunications services to consider undertaking projects that 
provide new telecommunications services and other telecommunications 
services not ordinarily financed by RUS. To facilitate the financing of 
those projects and services, RUS is willing to consider accommodating 
the Government's lien on telecommunications borrowers' systems in an 
expedited manner based on the financial strength of the borrowers 
operations. This will help enable RUS telecommunications providers to 
compete in an expanding number of telecommunications services may be 
critical to their financial strength and stability.

EFFECTIVE DATE: This rule is effective August 9, 2001.

FOR FURTHER INFORMATION CONTACT: Jonathan P. Claffey, Deputy Assistant 
Administrator, Telecommunications Program, Rural Utilities Service, 
U.S. Department of Agriculture, 1400 Independence Avenue, SW., STOP 
1590, Room 4056, Washington, DC 20250-1590. Telephone number (202) 720-
9556.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This rule has been determined to be significant for purposes of 
Executive Order 12866 and therefore has been reviewed by the Office of 
Management and Budget (OMB).

Executive Order 12372

    This rule is excluded from the scope of Executive Order 12372, 
Intergovernmental Consultation, which may require a consultation with 
State and local officials. See the final rule related notice entitled, 
``Department Programs and Activities Excluded from Executive Order 
12372'' (50 FR 47034).

Executive Order 12988

    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. RUS has determined that this rule meets the applicable 
standards provided in section 3 of the Executive Order. In addition, 
all State and local laws and regulations that are in conflict with this 
rule will be preempted, no retroactive effort will be given to this 
rule, and, in accordance with sec. 212(e) of the Department of 
Agriculture Reorganization Act of 1994 (7 U.S.C. Sec. 6912(e)), 
administrative appeal procedures, if any, must be exhausted before an 
action against the Department or its agencies may be initiated.

Regulatory Flexibility Act Certification

    RUS has determined that this rule will not have a significant 
economic impact on a substantial number of small entities, as defined 
in the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). The RUS 
telecommunications program provides loans to borrowers at interest 
rates and on terms that are more favorable than those generally 
available from the private sector. RUS borrowers, as a result of 
obtaining federal financing, receive economic benefits that exceed any 
direct economic costs associated with complying with RUS regulations 
and requirements.

Information Collection and Recordkeeping Requirements

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
chapter 35), RUS invites comments on this information collection for 
which RUS intends to request approval from the Office of Management and 
Budget (OMB). These requirements have been approved by emergency 
clearance under OMB Control Number 0572-0126.
    Comments on this information collection must be received by October 
9, 2001.
    Comments are invited on (a) whether the collection of information 
is necessary for the proper performance of the functions of the agency, 
including whether the information will have practical utility; (b) the 
accuracy of the agency's estimate of burden including the validity of 
the methodology and assumption used; (c) ways to enhance the quality, 
utility and clarity of the information to be collected; and (d) ways to 
minimize the burden of the collection of information on those who are 
to respond, including through the use of appropriate automated, 
electronic, mechanical, or other technological collection techniques or 
other forms of information technology.
    Comments may be sent to F. Lamont Heppe, Jr., Director, Program 
Development and Regulatory Analysis, Rural Utilities Service, U.S. 
Department of Agriculture, 1400 Independence Ave., SW., Stop 1522, Room 
4034 South Building, Washington, D.C. 20250-1522.
    Title: 7 CFR part 1744, subpart B, ``Lien Accommodation and 
Subordination Policy''
    Type of Request: New collection.
    Estimate of Burden: Public reporting burden for this collection of 
information is estimated to average 1 hour per respondent.
    Respondents: Business or other for-profit and non-profit 
institutions.
    Estimated Number of Respondents: 30.
    Estimated Number of Responses per Respondent: 2.
    Estimated Total Annual Burden on Respondents: 23.
    Copies of this information collection can be obtained from Michele 
Brooks, Program Development and Regulatory Analysis, at (202) 690-1078.
    All responses to this information collection and recordkeeping 
notice will be summarized and included in the request for OMB approval. 
All comments will also become a matter of public record.

National Environmental Policy Act Certification

    The Administrator of RUS has determined that this rule will not 
significantly affect the quality of the human environment as defined by 
the

[[Page 41756]]

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.

Catalog of Federal Domestic Assistance

    The program described by this rule is listed in the Catalog of 
Federal Domestic Assistance Programs under number 10.851, Rural 
Telephone Loans and Loan Guarantees; and number 10.852, 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 20402-9325.

Unfunded Mandates

    This rule contains no Federal mandates (under the regulatory 
provisions of Title II of the Unfunded Mandates Reform Act of 1995) for 
State, local, and tribal governments or the private sector. Thus, this 
rule is not subject to the requirements of section 202 and 205 of the 
Unfunded Mandates Reform Act of 1995.

Background

    RUS is amending its regulations covering lien accommodations under 
certain circumstances where the borrower's financial strength is 
sufficient to protect security for the Government's loans and the 
lender seeking a lien accommodation.
    Since the passage of the Telecommunications Act of 1996, which 
provides for a competitive, deregulated national telecommunications 
policy framework, the Federal Communications Commission (FCC) has been 
working to implement the provisions of the law. As those provisions 
begin to be integrated through the FCC's rulemaking process, the FCC is 
focusing on the types of telecommunications service that must be made 
available to all Americans; i.e. part of universal service, and the 
benefits to all Americans from advanced services for schools, 
libraries, and rural health care providers. The newly competitive 
environment will undoubtedly affect the rural telecommunications 
marketplace. For the industry as a whole--urban and rural--competition 
will offer the means for delivering the universal service concept 
envisioned by the Telecommunications Act of 1996. In the competitive 
marketplace of the future, investment in infrastructure will be 
lucrative in markets where local exchange carriers seek to attract 
high-usage, low-cost subscribers. Competition will be fierce and 
customers will be the winners as their demands for new and improved 
service at affordable rates will be met. Yet in rural and high-cost 
areas, where quality of service and advanced service offerings are just 
as important, there is less potential for investment based on 
competition. Investment will need to be encouraged in the form of 
incentives through the universal support mechanisms and the lending 
programs of RUS, as well as private sources of financing. RUS will 
continue its partnership with rural America to ensure that 
telecommunications providers will have the means to modernize their 
networks; however, industry deregulation and new technological 
developments have caused RUS borrowers and other organizations 
providing telecommunications services to consider undertaking projects 
that provide new telecommunications services and other 
telecommunications services not ordinarily financed by RUS. Although 
some of these services may not be eligible for financing under the 
Rural Electrification Act of 1936 (RE Act), these services may 
nevertheless advance RE Act objectives where the borrower obtains 
financing from private lenders.
    Due to the changing environment of the telecommunications industry, 
large or predominately non-rural local exchange carriers (LECs) are 
selling their more rural exchanges in order to concentrate on their 
more lucrative service areas. This ``sell-off'' provides an opportunity 
for rural LECs to expand their service territories. Typically, these 
acquired exchanges will need infrastructure improvements and the rural 
LECs will work hard to provide state-of-the-art service. This will 
require increased investment. RUS loans for infrastructure building can 
enable rural LECs to upgrade plant and service territories that may 
have been neglected for years. All subscribers, urban and rural, 
benefit from improvements to the national network. While opportunities 
exist for rural LECs to expand their markets and continue the tradition 
of providing the best possible service available to rural residents, 
uncertainties regarding future revenue streams and the availability of 
funds from universal service support may hamper some small LECs' 
investment decisions. The amendments to this regulation will help to 
facilitate funding from non-RUS sources in order to meet the growing 
capital needs of rural LECs. Depending on the purposes for which a lien 
accommodation is being sought, RUS will provide ``automatic'' approval 
for borrowers that meet the financial tests described in this rule. RUS 
believes that borrowers that are financially sound should be afforded 
more flexibility with regard to financial arrangements with outside 
lenders for the purpose of promoting rural telecommunications. The 
tests are designed to ensure that the financial strength of the 
borrower is more than sufficient to protect the government's loan 
security interests; hence, the lien accommodations will not adversely 
affect the government's financial interests.
    In addition to providing for automatic lien accommodations, this 
amendment removes the requirement for borrowers seeking lien 
accommodations to comply with competitive bid procedures under 7 CFR 
part 1753. Further, RUS proposes to address other concerns involved in 
the accommodation of the Government's lien for those borrowers that do 
not qualify for an automatic lien accommodation in a subsequent 
revision to this subpart.

Comments

    A proposed rule was published December 15, 1999, at 64 FR 69946.
    During the comment period that ended February 14, 2000, RUS 
received comments from the following organizations:
    (1) Cooper, White & Cooper LLR, representing:National Rural Telecom 
AssociationOrganization for the Protection and Advancement of 
SmallTelecommunications CompaniesUnited States Telecom Association; 
andWestern Rural Telephone Association
    (2) Rural Telephone Finance Cooperative; and
    (3) CoBank.
    The comments and RUS' responses follow:
    Comment summary. The respondents commented that RUS should utilize 
consolidated financial reports when determining a borrower's 
eligibility for an ``automatic'' lien accommodation under this rule, 
rather than unconsolidated borrower financial statements that reflect 
only the telecommunication company's or cooperative's financial 
condition.
    RUS response. When dealing with the security of the government's 
loans, RUS must rely on the financial strength of the borrower and its 
ability to survive economically based on its ``telecommunications 
service'' operations. Basing financial tests on consolidated statements 
may distort the true health of the borrower's financial position with 
regards to its operations. In addition, the RUS mortgage does not 
provide a lien on assets not held by the

[[Page 41757]]

borrower and therefore, RUS believes the best measure is to use 
unconsolidated statements.
    Comment summary. The respondents request that RUS implement rule 
changes that would allow a borrower to effect the release of lien of 
the government's mortgage on after-acquired property upon a showing of 
sufficient financial strength to ensure that the government's security 
interest is adequate to protect the RUS loan.
    RUS response. RUS disagrees with this position. RUS views each 
borrower as an `on-going' project whereby the strength of its 
operations as a whole is needed to adequately secure the government's 
interests. Commercial operations are oftentimes cyclical and evidence 
of current financial strength is not an insurance of future financial 
performance.
    Comment summary. The respondents requested that RUS clarify whether 
TIER and Debt Service were calculated on a before or after-tax basis.
    RUS response. As noted in the definition section, both ratios use 
`net income', denoting that the calculations are after income taxes.
    Comment summary. The respondents requested that RUS eliminate the 
requirement that the weighted average life of the new private lender 
notes does not exceed the remaining weighted average life of the notes 
being refinanced, stating that in some cases, longer maturity periods 
that would reduce debt service payment could improve cash flow. In 
addition, the respondents requested that the terms of the loans be 
measured by the borrowers ability to repay the loan as indicated by 
TIER and Debt Service Coverage.
    RUS response. Increasing the life of the loan beyond the remaining 
original life could have the effect of severely under-collaterallizing 
the debt, thereby putting the lenders at risk of not having sufficient 
assets to provide adequate security. An open-ended maturity period, as 
suggested by relying on TIER and Debt Service Coverage indicators, only 
exacerbates the lenders' risks.
    Comment summary. RUS should increase the principal amount of a loan 
from a private lender to refinance or refund the Government's loan from 
not greater than 105 percent of the of the balance of the notes being 
refunded or refinanced to not less than 112 percent, or eliminate the 
percentage limitation altogether. The respondents propose that this 
would allow borrowers to cover additional closing and fees associated 
with the new financing.
    RUS response. RUS recognizes that loans from private lenders may 
contain fees and equity contribution requirements, and therefore, will 
raise the percentage limitation from not more than 105 percent to not 
more than 112 percent. This should provide a reasonable level at which 
borrowers seeking to finance closing costs and associated fees and 
equity contributions would be able to do so.
    Comment summary. Sections 1744.30(c)(2)(iii) and (iv) could be in 
conflict with each other if the number of years remaining on a loan to 
be refinanced is less than five. Paragraph (c)(2)(iv) requires the 
refinancing to be amortized for a period of not less than five years.
    RUS response. RUS agrees that there is the potential for conflict 
in the way the proposed rule worded those sections. The final rule has 
been modified to allow for the amortization period of the loan to be, 
at a minimum, the original remaining years to maturity.
    Comment summary. The respondents stated a preference for a net 
assets to long-term debt test instead of the proposed net plant to 
long-term debt test in Secs. 1744.30(d)(2) and 1744.30(e)(2). As stated 
in the rule, the ratio includes, on a pro-forma basis, the new private 
lender debt but does not include the plant associated with that debt. 
In addition, where the proceeds of the private lender debt go to a 
subsidiary, even if the formula accounted for the new assets, they 
would not be recorded on the borrower's balance sheet, thereby reducing 
the borrower's ability to meet the test. The respondents argued that 
using net assets, where the borrower owns assets that are not counted 
as plant, would be better since many borrowers have substantial assets 
that are not plant.
    RUS response. The premise behind providing ``automatic'' lien 
accommodations is based on the strength of a borrower's financial 
condition and a negligible potential for loan security risk based on 
that strength. Using net plant rather than net assets counts only those 
assets on which the government's mortgage provides a perfected first 
lien. RUS has, however, revised the ratio test to include, on a pro-
forma basis, the associated plant to be added by the private lender 
debt, when that plant is owned directly by the borrower. In the case of 
a borrower flowing through the proceeds of the private lender debt to a 
subsidiary, RUS believes that the borrower should have sufficient net 
plant need to provide RUS with adequate security necessary for the 
``automatic'' lien accommodation, since the subsidiary's assets 
(financed through the lien accommodation) are not covered by the 
government's mortgage.
    Comment summary. The respondents stated that RUS should consider 
including ``non-plant'' costs, such as transaction fees, working 
capital, and goodwill, associated with exchanges or purchases as 
eligible costs for lien accommodations under the regulation. They 
stated that these costs are typically contemplated in the purchase of 
existing systems as well as in new projects and that if private lenders 
were willing to finance these ``non-plant'' costs, RUS should not 
object to inclusion of these costs under the lien of the mortgage.
    RUS response. The ``soft costs'' associated with the construction 
or acquisition of assets provide little or no tangible security. 
Accommodating payment of such costs under the lien of the mortgage 
would dilute the security of the other mortgage.
    Comment summary. The respondents questioned the need for the 
certification from the borrower's CPA to the financial tests required 
in sections 1744(d)(5) and (e)(5), and stated that since RUS already 
had borrowers' CPA audits, certification should only be required when 
the audit had not yet been received by RUS.
    RUS response. The CPA audit does not calculate nor attest to a 
borrower's achievement of TIER or Debt Service Coverage. The assurance 
provided by the CPA's certification of the borrower's achievement of 
the financial requirements is crucial to the ``automatic'' lien 
accommodation process. To expedite the process, borrowers may wish to 
have the CPA prepare the certification at the completion of the annual 
audit, thereby eliminating the need for further participation by the 
CPA.
    Comment summary. The respondents objected to the provision that the 
financing agreement between the borrower and the private lender provide 
for the private lender to terminate advances on its loan to the 
borrower when the borrower is in default under the terms of its 
mortgage with RUS. They argue that this places an undue burden on the 
private lender that is contractually obligated to advance funds under 
the terms of its loan. The respondents stated that once the terms of 
the ``automatic'' lien accommodation have been met, RUS should take the 
risk for the facility financed. Further, the respondents stated that 
the burden should be placed on the borrower to cease the request for 
advances, not on the private lender.
    RUS response. As a provision for obtaining an automatic lien 
accommodation (which does not require RUS approval when the criteria 
contained in the regulation are met), to

[[Page 41758]]

protect the security for the Government's loans, the borrower should 
cease to incur additional private debt when it is in default on the 
Government's loans. Further, the respondents incorrectly view the 
burden as being placed on the private lender, and not on the borrower. 
The regulation clearly states that the financing agreement, a document 
prepared and executed prior to the advance of funds, contain the 
provision for termination of advance of funds upon request by RUS. In 
the event of a default, RUS would notify the borrower and the private 
lender so that they could comply with the termination of advance of 
funds provision. Therefore, notice to the private lender would not 
place the private lender under two inconsistent obligations.
    Comment summary. Section 1744.30(e) pertains only to ``wholly-
owned'' subsidiaries and is silent as to structures in which a borrower 
is a participant in a joint venture or partnership. The respondents 
argue that these types of projects are often undertaken for the mutual 
benefit of numerous telecommunications providers and that the 
regulation should make provision for these increasingly common 
ventures.
    RUS response. At the present time, RUS believes that limiting the 
applicability of ``automatic'' lien accommodations to wholly-owned 
subsidiaries is prudent and in the best interest of protecting security 
for the Government's loans. Borrowers are, of course, not prevented 
from requesting approval for a lien accommodation under the traditional 
procedures for these types of projects. The comment is, however, 
beneficial and RUS will take it under advisement for future policy 
discussion.
    Comment summary. The respondents argue that the financial tests in 
Secs. 1744.30(e)(1) (TIER not less than 2.5 and DSC not less than 1.5) 
and (e)(3) (equity percentage not less than 45 percent) seem excessive 
and may result in most RUS or RTB borrowers failing to qualify for 
automatic lien accommodations when the assets are to be owned by a 
subsidiary.
    RUS response. The financial tests required when the assets are to 
be owned by a subsidiary are more stringent, by design, and are 
intended to ensure that only the healthiest, strongest borrowers 
qualify, since there is no direct tie to assets being funded in 
relation to the security that RUS is giving up. By RUS' calculation, 
based on the most recent financial data available, 40% of RUS' 
telecommunications borrowers qualify. As noted before, in the case of a 
borrower flowing through the proceeds of the private lender debt to a 
subsidiary, RUS believes that the borrower should have sufficient 
financial strength to provide RUS with adequate security, since the 
subsidiary's assets (financed through the lien accommodation) are not 
subject to the lien of the borrower's mortgage with RUS.
    Comment summary. The respondents inquired whether an equity 
investment in a subsidiary, as opposed to a loan, would be permissible. 
In addition, the respondents believed there may be some conflict in 
RUS' treatment of loans to subsidiaries as investments allowed under 
the borrower's current mortgage with RUS.
    RUS response. Equity investments or contributions are clearly 
different from loans with defined repayment terms and contractual 
agreements. RUS intended to only provide for loans to the subsidiary. 
RUS further has provided, in section 1744.30(i)(2), that such loans, 
when made in accordance with the terms of this regulation, do not 
require RUS approval as investments in affiliated companies, thereby 
releasing the borrower from obtaining ``double'' approval for the same 
investment.
    Comment summary. Clarification was requested with regard to 
Sec. 1744.30(e)(6)(vii), regarding the submission, upon request by RUS, 
of the financing or guarantee agreement between the borrower and the 
subsidiary.
    RUS response. This section is only intended to ensure that RUS has 
the right to review the terms and conditions, if merited, of the 
borrower's loan or guarantee of a loan to its subsidiary. With regard 
to loan guarantees, where the debt exists at the subsidiary level, and 
the borrower is guaranteeing the debt, automatic approval of a lien 
accommodation under this section would permit the guarantee of the debt 
without having it count against the borrower's allowable distribution 
of capital as contained in the borrower's mortgage with RUS.
    Comment summary. The respondents requested that RUS provide 
acknowledgement for an automatic lien accommodation to the private 
lender in addition to the acknowledgement to the borrower.

RUS response.

    RUS agrees and will provide such acknowledgment.

List of Subjects in 7 CFR Part 1744

    Accounting, Loan programs-communications, Reporting and 
recordkeeping requirements, Rural areas, Telephone.

    For reasons set out in the preamble, RUS amends 7 CFR chapter XVII 
as follows:

PART 1744--POST-LOAN POLICIES AND PROCEDURES COMMON TO GUARANTEED 
AND INSURED TELEPHONE LOANS

    1. The authority citation for part 1744 is revised to read as 
follows:

    Authority: 7 U.S.C. 901 et seq., 1921 et seq., and 6941 et seq.

Subpart B--Lien Accommodations and Subordination Policy

    2. Sections 1744.20 and 1744.21 are revised to read as follows:


Sec. 1744.20  General.

    (a) Recent changes in the telecommunications industry, including 
deregulation and technological developments, have caused Rural 
Utilities Service (RUS) borrowers and other organizations providing 
telecommunications services to consider undertaking projects that 
provide new telecommunications services and other telecommunications 
services not ordinarily financed by RUS. Although some of these 
services may not be eligible for financing under the Rural 
Electrification Act of 1936 (RE Act), these services may nevertheless 
advance RE Act objectives where the borrower obtains financing from 
private lenders. The borrower's financial strength and the assurance of 
repayment of outstanding Government debt may be improved as a result of 
providing such telecommunications services.
    (b) To facilitate the financing of new services and other services 
not ordinarily financed by RUS, RUS is willing to consider 
accommodating the Government's lien on telecommunications borrowers' 
systems or accommodating or subordinating the Government's lien on 
after-acquired property of telecommunications borrowers. To expedite 
this process, requests for lien accommodations meeting the requirements 
of Sec. 1744.30 will receive automatic approval from RUS.
    (c) This subpart establishes RUS policy with respect to all 
requests for lien accommodations and subordinations for loans from 
private lenders. For borrowers that do not qualify for automatic lien 
accommodations in accordance with Sec. 1744.30, RUS will consider lien 
accommodations for RE Act purposes under Sec. 1744.40 and non-Act 
purposes under Sec. 1744.50.

[[Page 41759]]

Sec. 1744.21  Definitions.

    The following definitions apply to this subpart:
    Administrator means the Administrator of RUS and includes the 
Governor of the RTB.
    Advance means transferring funds from RUS, RTB, or a lender 
guaranteed by RUS to the borrower's construction fund.
    After-acquired property means property which is to be acquired by 
the borrower and which would be subject to the lien of the Government 
mortgage when acquired.
    Amortization expense means the sum of the balances of the following 
accounts of the borrower:

------------------------------------------------------------------------
                        Account names                            Number
------------------------------------------------------------------------
(1) Amortization expense.....................................     6560.2
(2) Amortization expense--tangible...........................       6563
(3) Amortization expense--intangible.........................       6564
(4) Amortization expense--other..............................       6565
------------------------------------------------------------------------


    Note: All references to account numbers are to the Uniform 
System of Accounts (7 CFR part 1770, subpart B).

    Asset means a future economic benefit obtained or controlled by the 
borrower as a result of past transactions or events.
    Automatic lien accommodation means the approval, by RUS, of a 
request to share the Government's lien on a pari passu or pro-rata 
basis with a private lender in accordance with the provisions of 
Sec. 1744.30.
    Borrower means any organization that has an outstanding 
telecommunications loan made or guaranteed by RUS, or that is seeking 
such financing. See 7 CFR part 1735.
    Construction Fund means the RUS Construction Fund Account into 
which all advances of loan funds are deposited pursuant to the 
provisions of the loan documents.
    Debt Service Coverage (DSC) ratio means the ratio of the sum of the 
borrower's net income, depreciation and amortization expense, and 
interest expense, all divided by the sum of all payments of principal 
and interest required to be paid by the borrower during the year on all 
its debt from any source with a maturity greater than 1 year and 
capital lease obligations.
    Default means any event or occurrence which, unless corrected, 
will, with the passage of time and the giving of proper notices, give 
rise to remedies under one or more of the loan documents.
    Depreciation expense means the sum of the balances of the following 
accounts of the borrower:

------------------------------------------------------------------------
                        Account names                            Number
------------------------------------------------------------------------
(1) Depreciation expense.....................................     6560.1
(2) Depreciation expense--telecommunications plant in service       6561
(3) Depreciation expense--property held for future                  6562
 telecommunications use......................................
------------------------------------------------------------------------


    Note: All references to account numbers are to the Uniform 
System of Accounts (7 CFR part 1770, subpart B).

    Disbursement means a transfer of money by the borrower out of the 
construction fund in accordance with the provisions of the fund.
    Equity percentage means the total equity or net worth of the 
borrower expressed as a percentage of the borrower's total assets.
    FFB means the Federal Financing Bank.
    Financial Requirement Statement (FRS) means RUS Form 481 (OMB--No. 
0572--0023). (This RUS Form is available from RUS, Program Development 
and Regulatory Analysis, Washington, DC 20250-1522).
    Government mortgage means any instrument to which the Government, 
acting through the Administrator, is a party and which creates a lien 
or security interest in the borrower's property in connection with a 
loan made or guaranteed by RUS whether the Government is the sole 
mortgagee or is a co-mortgagee with a private lender.
    Hardship loan means a loan made by RUS under section 305(d)(1) of 
the RE Act.
    Interim construction means the purchase of equipment or the conduct 
of construction under an RUS-approved plan of interim financing. See 7 
CFR part 1737.
    Interest expense means the sum of the balances of the following 
accounts of the borrower:

------------------------------------------------------------------------
                        Account names                            Number
------------------------------------------------------------------------
(1) Interest and related items...............................       7500
(2) Interest on funded debt..................................       7510
(3) Interest expense--capital leases.........................       7520
(4) Amortization of debt issuance expense....................       7530
(5) Less Allowance for funds used during construction........      7340/
                                                                  7300.4
(6) Other interest deductions................................       7540
------------------------------------------------------------------------


    Note: All references to account numbers are to the Uniform 
System of Accounts (7 CFR part 1770, subpart B).

    Interim financing means funding for a project which RUS has 
acknowledged may be included in a loan, should said loan be approved, 
but for which RUS loan funds have not yet been made available.
    Lien accommodation means sharing the Government's lien on a pari 
passu or pro-rata basis with a private lender.
    Loan means any loan made or guaranteed by RUS.
    Loan documents means the loan contract, note and mortgage between 
the borrower and RUS and any associated document pertinent to a loan.
    Loan funds means the proceeds of a loan made or guaranteed by RUS.
    Material and supplies means any of the items properly recordable in 
the following account of the borrower:

------------------------------------------------------------------------
                        Account names                            Number
------------------------------------------------------------------------
(1) Material and Supplies....................................     1220.1
------------------------------------------------------------------------


    Note: All references to account numbers are to the Uniform 
System of Accounts (7 CFR part 1770, subpart B).

    Net income/Net margins means the sum of the balances of the 
following accounts of the borrower:

------------------------------------------------------------------------
               Account names                           Number
------------------------------------------------------------------------
(1) Local Network Services Revenues.......  5000 through 5069
(2) Network Access Services Revenues......  5080 through 5084
(3) Long Distance Network Services          5100 through 5169
 Revenues.
(4) Miscellaneous Revenues................  5200 through 5270
(5) Nonregulated Revenues.................  5280
(6) Less Uncollectible Revenues...........  5200 through 5302
(7) Less Plant Specific Operations Expense  6110 through 6441
(8) Less Plant Nonspecific Operations       6510 through 6565
 Expense.
(9) Less Customer Operations Expense......  6610 through 6623
(10) Less Corporate Operations Expense....  6710 through 6790
(11) Other Operating Income and Expense...  7100 through 7160
(12) Less Operating Taxes.................  7200 through 7250/7200.5
(13) Nonoperating Income and Expense......  7300 through 7370
(14) Less Nonoperating Taxes..............  7400 through 7450/7400.5
(15) Less Interest and Related Items......  7500 through 7540
(16) Extraordinary Items..................  7600 through 7640/7600.4
(17) Jurisdictional Differences and         7910 through 7990
 Nonregulated Income Items.
------------------------------------------------------------------------


    Note: All references to account numbers are to the Uniform 
System of Accounts (7 CFR part 1770, subpart B).

    Net plant means the sum of the balances of the following accounts 
of the borrower:

[[Page 41760]]



------------------------------------------------------------------------
               Account names                           Number
------------------------------------------------------------------------
(1) Property, Plant and Equipment.........  2001 through 2007
(2) Less Depreciation and Amortization....  3100 through 3600
------------------------------------------------------------------------


    Note: All references to account numbers are to the Uniform 
System of Accounts (7 CFR part 1770, subpart B).

    Notes means evidence of indebtedness secured by or to be secured by 
the Government mortgage.
    Pari Passu means equably; ratably; without preference or 
precedence.
    Plant means any of the items properly recordable in the following 
accounts of the borrower:

------------------------------------------------------------------------
               Account names                           Number
------------------------------------------------------------------------
(1) Property, Plant and Equipment.........  2001 through 2007
------------------------------------------------------------------------


    Note: All references to account numbers are to the Uniform 
System of Accounts (7 CFR part 1770, subpart B).

    Private lender means any lender other than the RUS or the lender of 
a loan guaranteed by RUS.
    Private lender notes means the notes evidencing a private loan.
    Private loan means any loan made by a private lender.
    RE Act (Act) means the Rural Electrification Act of 1936 (7 U.S.C. 
901 et seq.) RTB means the Rural Telephone Bank.
    RUS means the Rural Utilities Service, and includes its 
predecessor, the Rural Electrification Administration. The term also 
includes the RTB, unless otherwise indicated.
    RUS cost-of-money loan means a loan made under section 305(d)(2) of 
the RE Act.
    Subordination means allowing a private lender to have a lien on 
specific property which will have priority over the Government's lien 
on such property.
    Tangible plant means any of the items properly recordable in the 
following accounts of the borrower:

------------------------------------------------------------------------
               Account names                           Number
------------------------------------------------------------------------
(1) Telecommunications Plant in Service--   2110 through 2124
 General Support Assets.
(2) Telecommunications Plant in Service--   2210 through 2232
 Central Office Assets.
(3) Telecommunications Plant in Service--   2310 through 2362
 Information Origination/Termination
 Assets.
(4) Telecommunications Plant in Service--   2410 through 2441
 Cable and Wire Facilities Assets.
(5) Amortizable Tangible Assets...........  2680 through 2682
(6) Nonoperating Plant....................  2006
------------------------------------------------------------------------


    Note: All references to account numbers are to the Uniform 
System of Accounts (7 CFR part 1770, subpart B).

    Telecommunication services means any service for the transmission, 
emission, or reception of signals, sounds, information, images, or 
intelligence of any nature by optical waveguide, wire, radio, or other 
electromagnetic systems and shall include all facilities used in 
providing such service as well as the development, manufacture, sale, 
and distribution of such facilities.
    Times interest earned ratio (TIER) means the ratio of the 
borrower's net income or net margins plus interest expense, divided by 
said interest expense.
    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 to account numbers are to the Uniform 
System of Accounts (7 CFR part 1770, subpart B).

    Total equity or net worth means the excess of a borrower's total 
assets over its total liabilities.
    Total liabilities means the sum of the balances of the following 
accounts of the borrower:

------------------------------------------------------------------------
               Account names                           Number
------------------------------------------------------------------------
(1) Current Liabilities...................  4010 through 4130.2
(2) Long-Term Debt........................  4210 through 4270.3
(3) Other Liabilities and Deferred Credits  4310 through 4370
------------------------------------------------------------------------


    Note: All references to account numbers are to the Uniform 
System of Accounts (7 CFR part 1770, subpart B).

    Total long-term debt means the sum of the balances of the following 
accounts of the borrower:

------------------------------------------------------------------------
               Account names                           Number
------------------------------------------------------------------------
(1) Long-Term Debt........................  4210 through 4270.3
------------------------------------------------------------------------


    Note: All references to account numbers are to the Uniform 
System of Accounts (7 CFR part 1770, subpart B).

    Weighted-average life of the loans or notes means the average life 
of the loans or notes based on the proportion of original loan 
principal paid during each year of the loans or notes. It shall be 
determined by calculating the sum of all loan or note principal 
payments expressed as a fraction of the original loan or note principal 
amount, times the number of years and fractions of years elapsed at the 
time of each payment since issuance of the loan or note. For example, 
given a $5 million loan, with a maturity of 5 years and equal principal 
payments of $1 million due on the anniversary date of the loan, the 
weighted-average life would be: (.2)(1 year) + (.2)(2 years) + (.2)(3 
years) + (.2)(4 years) + (.2)(5 years) = .2 years + .4 years + .6 years 
+ .8 years + 1.0 years = 3.0 years. If instead the loan had a balloon 
payment of $5 million at the end of 5 years, the weighted-average life 
would be: ($5 million/$5 million)(5 years) = 5 years.
    Weighted-average remaining life of the loans or notes means the 
remaining average life of the loans or notes based on the proportion of 
remaining loan or note principal expressed in years remaining to 
maturity of the loans or notes. It shall be determined by calculating 
the sum of the remaining principal payments of each loan or note 
expressed as a fraction of the total remaining loan or note amounts 
times the number of years and fraction of years remaining until 
maturity of the loan or note.
    Weighted-average remaining useful life of the assets means the 
estimated original average life of the assets to be acquired with the 
proceeds of the private lender notes expressed in years based on 
depreciation rates less the number of years those assets have been in 
service (or have been depreciated). It shall be determined by 
calculating the sum of each asset's remaining value expressed as a 
fraction of the total remaining value of the assets, times the 
estimated number of years and fraction of years remaining until the 
assets are fully depreciated.
    Wholly-owned subsidiary means a corporation owned 100 percent by 
the borrower.

    3. Sections 1744.30, 1744.40, and 1744.50 are redesignated as 
Secs. 1744.40, 1744.50, and 1744.55, respectively.

[[Page 41761]]


    4. New Sec. 1744.30 is added to read as follows:


Sec. 1744.30  Automatic lien accommodations.

    (a) Purposes and requirements for approval. Automatic lien 
accommodations are available only for refinancing and refunding of 
notes secured by the borrower's existing Government mortgage; financing 
assets, to be owned by the borrower, to provide telecommunications 
services; or financing assets, to be owned by a wholly-owned subsidiary 
of the borrower, to provide telecommunications services in accordance 
with the procedures set forth in this section.
    (b) Private lender responsibility. The private lender is 
responsible for ensuring that its notes, for which an automatic lien 
accommodation has been approved as set forth in this section, are 
secured under the mortgage. The private lender is responsible for 
ensuring that the supplemental mortgage is a valid and binding 
instrument enforceable in accordance with its terms, and recorded and 
filed in accordance with applicable law. If the private lender 
determines that additional documents are required or that RUS must take 
additional actions to secure the notes under the mortgage, the private 
lender shall follow the procedures set forth in Sec. 1744.40 or 
Sec. 1744.50, as appropriate.
    (c) Refinancing and refunding. The Administrator will automatically 
approve a borrower's execution of private lender notes and the securing 
of such notes on a pari passu or pro-rata basis with all other notes 
secured under the Government mortgage, when such private lender notes 
are issued for the purpose of refinancing or refunding any notes 
secured under the Government mortgage, provided that all of the 
following conditions are met:
    (1) No default has occurred and is continuing under the Government 
mortgage;
    (2) The borrower has delivered to the Administrator, at least 10 
business days before the private lender notes are to be executed, a 
certification and agreement executed by the President of the borrower's 
Board of Directors, such certification and agreement to be 
substantially in the form set forth in Appendix A of this subpart, 
providing that:
    (i) No default has occurred and is continuing under the Government 
mortgage;
    (ii) The principal amount of such refinancing or refunding notes 
will not be greater than 112 percent of the then outstanding principal 
balance of the notes being refinanced or refunded;
    (iii) The weighted-average life of the private loan evidenced by 
the private lender notes will not exceed the weighted-average remaining 
life of the notes being refinanced or refunded;
    (iv) The private lender notes will provide for substantially level 
debt service or level principal amortization over a period not less 
than the original remaining years to maturity;
    (v) Except as provided in the Government mortgage, the borrower has 
not agreed to any restrictions or limitations on future loans from RUS; 
and
    (vi) If the private lender determines that a supplemental mortgage 
is necessary, the borrower will comply with those procedures contained 
in paragraph (h) of this section for the preparation, execution, and 
delivery of a supplemental mortgage and take such additional action as 
may be required to secure the notes under the Government mortgage.
    (d) Financing assets to be owned directly by a borrower. The 
Administrator will automatically approve a borrower's execution of 
private lender notes and the securing of such notes on a pari passu or 
pro-rata basis with all other notes secured under the Government 
mortgage, when such private lender notes are issued for the purpose of 
financing the purchase or construction of plant and material and 
supplies to provide telecommunication services and when such assets are 
to be owned and the telecommunications services are to be offered by 
the borrower, provided that all of the following conditions are met:
    (1) The borrower has achieved a TIER of not less than 1.5 and a DSC 
of not less than 1.25 for each of the borrower's two fiscal years 
immediately preceding the issuance of the private lender notes;
    (2) The ratio of the borrower's net plant to its total long-term 
debt at the end of any calendar month ending not more than 90 days 
prior to execution of the private lender notes is not less than 1.2, on 
a pro-forma basis, after taking into account the effect of the private 
lender notes and additional plant on the total long-term debt of the 
borrower;
    (3) The borrower's equity percentage, as of the most recent fiscal 
year-end, was not less than 25 percent;
    (4) No default has occurred and is continuing under the Government 
mortgage;
    (5) The borrower has delivered to the Administrator, at least 10 
business days before the private lender notes are to be executed, a 
certification by an independent certified public accountant that the 
borrower has met each of the requirements in paragraphs (d)(1) and 
(d)(3) of this section, such certification to be substantially in the 
form in Appendix B of this subpart; and
    (6) The borrower has delivered to the Administrator, at least 10 
business days before the private lender notes are to be executed, a 
certification and agreement executed by the President of the borrower's 
Board of Directors, such certification and agreement to be 
substantially in the form in Appendix C of this subpart: provided, 
that:
    (i) The borrower has met each of the requirements in paragraphs 
(d)(2) and (d)(4) of this section;
    (ii) The proceeds of the private lender notes are to be used for 
the construction or purchase of the plant and materials and supplies to 
provide telecommunications services in accordance with this section and 
such construction or purchase is expected to be completed not later 
than 4 years after execution of such notes;
    (iii) The weighted-average life of the private loan evidenced by 
the private lender notes does not exceed the weighted-average remaining 
useful life of the assets being financed;
    (iv) The private lender notes will provide for substantially level 
debt service or level principal amortization over a period not less 
than the original remaining years to maturity;
    (v) All of the assets financed by the private loans will be 
purchased or otherwise procured in bona fide arm's length transactions;
    (vi) The financing agreement with the private lender will provide 
that the private lender shall cease the advance of funds upon receipt 
of written notification from RUS that the borrower is in default under 
the RUS loan documents;
    (vii) Except as provided in the Government mortgage, the borrower 
has not agreed to any restrictions or limitations on future loans from 
RUS; and
    (viii) If the private lender determines that a supplemental 
mortgage is necessary, the borrower will comply with those procedures 
set forth in paragraph (h) of this section for the preparation, 
execution, and delivery of a supplemental mortgage and take such 
additional action as may be required to secure the notes under the 
Government mortgage.
    (e) Financing assets to be owned by a wholly-owned subsidiary of 
the borrower. The Administrator will automatically approve a borrower's 
execution of private lender notes and the securing of such notes on a 
pari passu or pro-rata basis with all other notes secured under the 
Government mortgage, when such private lender

[[Page 41762]]

notes are issued for the purpose of financing the purchase or 
construction of tangible plant and material and supplies to provide 
telecommunication services and when such services are to be offered and 
the associated tangible assets are to be owned by a wholly-owned 
subsidiary of the borrower, provided that all of the following 
conditions are met:
    (1) The borrower has achieved a TIER of not less than 2.5 and a DSC 
of not less than 1.5 for each of the borrower's two fiscal years 
immediately preceding the issuance of the private lender notes;
    (2) The ratio of the borrower's net plant to its total long-term 
debt at the end of any calendar month ending not more than 90 days 
prior to execution of the private lender notes is not less than 1.6, on 
a pro-forma basis, after taking into account the effect of the private 
lender notes and additional plant on the total long-term debt of the 
borrower;
    (3) The borrower's equity percentage, as of the most recent fiscal 
year-end, was not less than 45 percent;
    (4) No default has occurred and is continuing under the Government 
mortgage;
    (5) The borrower has delivered to the Administrator, at least 10 
business days before the private lender notes are to be executed, a 
certification by an independent certified public accountant that the 
borrower has met each of the requirements in paragraphs (e)(1) and 
(e)(3) of this section, such certification to be substantially in the 
form in Appendix D of this subpart; and
    (6) The borrower has delivered to the Administrator, at least 10 
business days before the private lender notes are to be executed, a 
certification and agreement executed by the President of the borrower's 
Board of Directors, such certification and agreement to be 
substantially in the form in Appendix E of this subpart; providing 
that:
    (i) The borrower has met each of the requirements in paragraphs 
(e)(2) and (e)(4) of this section;
    (ii) The proceeds of the private lender notes are to be used for 
the construction or purchase of the tangible plant and materials and 
supplies to provide telecommunications services in accordance with this 
section and such construction or purchase is expected to be completed 
not later than 4 years after execution of such notes;
    (iii) The weighted-average life of the private loan evidenced by 
the private lender notes does not exceed the weighted-average remaining 
useful life of the assets being financed;
    (iv) The private lender notes will provide for substantially level 
debt service or level principal amortization over a period not less 
than the original remaining years to maturity;
    (v) All of the assets financed by the private loans will be 
purchased or otherwise procured in bona fide arm's length transactions;
    (vi) The proceeds of the private lender notes will be lent to a 
wholly-owned subsidiary of the borrower pursuant to terms and 
conditions agreed upon by the borrower and subsidiary;
    (vii) The borrower will, whenever requested by RUS, provide RUS 
with a copy of the financing or guarantee agreement between the 
borrower and the subsidiary or any similar or related material 
including security instruments, loan contracts, or notes issued by the 
subsidiary to the borrower;
    (viii) The borrower will promptly report to the Administrator any 
default by the subsidiary or other actions that impair or may impair 
the subsidiary's ability to repay its loans;
    (ix) The financing agreement with the private lender will provide 
that the private lender shall cease the advance of funds upon receipt 
of written notification from RUS that the borrower is in default under 
the RUS loan documents;
    (x) Except as provided in the Government mortgage, the borrower has 
not agreed to any restrictions or limitations on future loans from RUS; 
and
    (xi) If the private lender determines that a supplemental mortgage 
is necessary, the borrower will comply with those procedures contained 
in paragraph (h) of this section for the preparation, execution, and 
delivery of a supplemental mortgage and take such additional action as 
may be required to secure the notes under the Government mortgage.
    (f) Borrower notification. The borrower shall notify RUS of its 
intention to obtain an automatic lien accommodation under Sec. 1744.30 
by providing the following:
    (1) The board resolution cited in Sec. 1744.55(b)(1) and the 
opinion of counsel cited in Sec. 1744.55(b)(2);
    (2) The applicable certification or certifications required by 
paragraph (c)(2); paragraphs (d)(5) and (d)(6); or paragraphs (e)(5) 
and (e)(6), respectively, of this section, in substantially the form 
contained in the applicable appendices to this subpart.
    (g) RUS acknowledgment. Within 5 business days of receipt of the 
completed certifications and any other information required under this 
section, RUS will review the information and provide written 
acknowledgment to the borrower and the private lender of its 
qualification for an automatic lien accommodation. Upon receipt of the 
acknowledgment, the borrower may execute the private lender notes.
    (h) Supplemental mortgage. If the private lender determines that a 
supplemental mortgage is required to secure the private lender notes on 
a pari passu or pro-rata basis with all other notes secured under the 
Government mortgage, the private lender may prepare the supplemental 
mortgage using the form attached as Appendix F to this subpart or the 
borrower may request RUS to prepare such supplemental mortgage in 
accordance with the following procedures:
    (1) The private lender preparing the supplemental mortgage shall 
execute and forward the completed document to RUS. Upon ascertaining 
the correctness of the form and the information concerning RUS, RUS 
will execute and forward the supplemental mortgage to the borrower.
    (2) When requested by the borrower, RUS will expeditiously prepare 
the supplemental mortgage, using the form in Appendix F to this 
subpart, upon submission by the private lender of:
    (i) The name of the private lender;
    (ii) The Property Schedule for inclusion as supplemental mortgage 
Schedule B, containing legally sufficient description of all real 
property owned by the borrower; and
    (iii) The amount of the private lender note.
    (3) The government is not responsible for ensuring that the 
supplemental mortgage has been executed by all parties and is a valid 
and binding instrument enforceable in accordance with its terms, and 
recorded and filed in accordance with applicable law. If the private 
lender determines that additional security instruments or other 
documents are required or that RUS must take additional actions to 
secure the private lender notes under the mortgage, the private lender 
shall follow the procedures established in Secs. 1744.40 or 1744.50, as 
appropriate. Except for the actions of the government expressly 
established in Sec. 1744.40, the government undertakes no obligation to 
effectuate an automatic lien accommodation. When processing of the 
supplemental mortgage has been completed to the satisfaction of the 
private lender, the borrower shall provide RUS with the following:
    (i) A fully executed counterpart of the supplemental mortgage, 
including all signatures, seals, and acknowledgements; and
    (ii) Copies of all opinions rendered by borrower's counsel to the 
private lender.
    (i) Other approvals. (1) The borrower is responsible for meeting 
all

[[Page 41763]]

requirements necessary to issue private lender notes and to accommodate 
the lien of the Government mortgage to secure the private lender notes 
including, but not limited to, those of the private lender, of any 
other mortgagees secured under the existing RUS mortgage, and of any 
governmental entities with jurisdiction over the issuance of notes or 
the execution and delivery of the supplemental mortgage.
    (2) To the extent that the borrower's existing mortgage requires 
RUS approval before the borrower can make an investment in an 
affiliated company, approval is hereby given for all investments made 
in affiliated companies with the proceeds of private lender notes 
qualifying for an automatic lien accommodation under paragraph (e) of 
this section. Any reference to an approval by RUS under the mortgage 
shall apply only to the rights of RUS and not to any other party.

    5. Revise newly redesignated Sec. 1744.50(a)(3), to read as 
follows:


Sec. 1744.50  Non-Act purposes.

    (a) * * *
    (3) Approval of the request is in the interests of the Government 
with respect to the financial soundness of the borrower and other 
matters, such as assuring that the borrower's system is constructed 
cost-effectively using sound engineering practices.

    6. In newly redesignated Sec. 1744.55, revise paragraph (a), remove 
paragraph (b)(5), and redesignate paragraph (b)(6) as paragraph (b)(5), 
to read as follows:


Sec. 1744.55  Application procedures.

    (a) Requests for information regarding applications for lien 
accommodations or subordination under this part should be addressed to 
the Assistant Administrator, Telecommunications Program, Rural 
Utilities Service, Washington, DC 20250-1590.
* * * * *
    7. Appendices A, B, C, D, E, and F are added to subpart B to read 
as follows:
BILLING CODE 3410-15-P

[[Page 41764]]

Appendix A to Subpart B of Part 1744--Statement, Certification, and 
Agreement of Borrower's President of Board of Directors Regarding 
Refinancing and Refunding Notes Pursuant to 7 CFR 1744.30(c)
[GRAPHIC] [TIFF OMITTED] TR09AU01.026


[[Page 41765]]



Appendix B to Subpart B of Part 1744--Certification of Independent 
Certified Public Accountant Regarding Notes To Be Issued Pursuant 
to 7 CFR 1744.30(c)
[GRAPHIC] [TIFF OMITTED] TR09AU01.027


[[Page 41766]]



Appendix C to Subpart B of Part 1744--Statement, Certification, and 
Agreement of Borrower's President of Board of Directors Regarding 
Notes To Be Issued Pursuant to 7 CFR 1744.30(d)
[GRAPHIC] [TIFF OMITTED] TR09AU01.028


[[Page 41767]]



Appendix D to Subpart B of Part 1744--Certification of Independent 
Certified Public Accountant Regarding Notes To Be Issued Pursuant 
to 7 CFR 1744.30
[GRAPHIC] [TIFF OMITTED] TR09AU01.029


[[Page 41768]]



Appendix E to Subpart B of Part 1744--Statement, Certification, and 
Agreement of Borrower's President of Board of Directors Regarding 
Notes To Be Issued Pursuant to 7 CFR 1744.30(e)
[GRAPHIC] [TIFF OMITTED] TR09AU01.030


[[Page 41769]]


[GRAPHIC] [TIFF OMITTED] TR09AU01.031


[[Page 41770]]



Appendix F to Subpart B of Part 1744--Form of Supplemental Mortgage
[GRAPHIC] [TIFF OMITTED] TR09AU01.032


[[Page 41771]]


[GRAPHIC] [TIFF OMITTED] TR09AU01.033


[[Page 41772]]


[GRAPHIC] [TIFF OMITTED] TR09AU01.034


    Dated: August 6, 2001.
Blaine D. Stockton,
Acting Administrator, Rural Utilities Service.
[FR Doc. 01-19981 Filed 8-8-01; 8:45 am]
BILLING CODE 3410-15-C