[Federal Register Volume 76, Number 248 (Tuesday, December 27, 2011)]
[Notices]
[Pages 80868-80869]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-33111]


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 Notices
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 This section of the FEDERAL REGISTER contains documents other than rules 
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  Federal Register / Vol. 76, No. 248 / Tuesday, December 27, 2011 / 
Notices  

[[Page 80868]]



DEPARTMENT OF AGRICULTURE

Office of the Secretary


Increasing Access to Rural Community Investment Opportunities for 
Investors

AGENCY: Office of the Secretary, USDA.

ACTION: Notice.

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SUMMARY: This Notice applies to investors interested in investment 
opportunities in rural infrastructure; these potential investors are 
encouraged to contact the Department of Agriculture (USDA). The Rural 
Development Act of 1972 established USDA's authority to make loans and 
grants to rural communities. Currently, USDA manages a loan portfolio 
of approximately $150 billion, of which $5.3 billion is for community 
facilities. USDA seeks to partner with investors willing to create and 
implement investment structures that would improve rural communities' 
access to capital by expanding the leveraging of USDA's community 
facilities loan funds. Given current turbulent market conditions, these 
investments may be particularly attractive to the private sector as 
they have historically provided low-risk, steady cash flows. USDA is 
open to considering a variety of different investment structures.

DATES: Please provide your contact information on or before January 26, 
2012.

ADDRESSES: Please submit your contact information to: Doug O'Brien, 
Room 205W, U.S. Department of Agriculture, 1400 Independence Ave., SW., 
Washington, DC 20250; [email protected].

FOR FURTHER INFORMATION CONTACT: For further information on this 
notice, please contact: Daniel Burrows, Room 205W, U.S. Department of 
Agriculture, 1400 Independence Ave., SW., Washington, DC 20250; 
[email protected].

SUPPLEMENTARY INFORMATION:

Purpose

    This notice offers the opportunity for interested investors to 
partner with USDA in considering and implementing different investment 
structures that provide increased access to capital for rural 
communities. These structures could provide investors with greater 
access to a large and stable pool of investments in rural America.
    USDA understands that investors have a responsibility to provide 
market rate returns for their investments, and these investment 
structures should be designed to be competitive as part of a larger 
``positive value driven'' portfolio.
    USDA is open to considering a variety of different investment 
structures. For example, investors could provide financing in projects 
with USDA at a project level or instead pool capital from different 
investors to create a dedicated infrastructure investment fund to 
invest directly in more projects. By law, USDA must continue to invest 
directly at a project level, but the private investor structure can be 
more flexible with debt and equity options, and driven by market 
interests. Investors would be at complete risk for any loss that 
results from their investment.

Background

    USDA has a long and successful history of making loans to rural 
communities. USDA's Rural Development Community Facility Program 
manages a loan portfolio of approximately $150 billion, of which $5.3 
billion is for community facilities. This program provides direct 
loans, guaranteed loans, and grants to rural communities to construct 
essential infrastructure such as schools, hospitals, and fire stations. 
This program creates jobs, increases the vibrancy of the rural economy, 
and enhances the quality of life in rural areas. Even in turbulent 
market conditions, these loans have generated steady returns, with very 
low default rates.
    USDA's Community Facilities program has been oversubscribed for the 
last three Federal fiscal years. During fiscal year 2012, USDA will 
make $1.3 billion of direct loans available to rural communities, an 
amount not likely to meet the demand from worthy projects. Currently, 
USDA has applications for over one billion dollars in rural 
communities, and it expects this backlog to increase during this fiscal 
year.
    USDA direct loans for community facilities are currently at a 3.75 
percent interest rate. A potential borrower could leverage this with 
another loan at a slightly higher market rate, and the blended rate 
could still be attractive to them.
    Thus, with the confluence of the backlog in projects and low 
lending rates, this is an opportune time to make funds available to 
these projects.
    The Agency employs a well-developed methodology of due diligence in 
awarding loans for Community Facility projects. This methodology 
includes a comprehensive look at past performance and future 
projections, including management, revenue security, future demand 
forecasts, retirement profiles, and historical financials. The Agency 
also makes an assessment of the broad-based community support for the 
facility as demonstrated by a variety of factors, including previous 
fundraising efforts. As a result, the Community Facility loan portfolio 
has historically performed extraordinarily well. However, investors 
would be at complete risk for any loss that results from their 
investment. Also, the Agency would need to have at least a parity 
position with respect to the security, such that in the event of a 
default, each lender would be affected on a proportionate basis.
    Thus, if the deal flow is there, our question to the private sector 
is whether there is also a demand for low-risk, long-term investments 
in rural America with stable cash flows.
    With this Notice, USDA seeks to obtain a list of investors, as 
described below, who are interested in pursuing the creation and 
implementation of investment structures designed to facilitate and 
increase rural America's access to capital. USDA will contact each 
respondent to discuss specific items associated with the creation and 
implementation of such investment structures. Items that will be 
discussed will include, but are not necessarily limited to investor 
desires for:
     Debt or equity,
     Loan term,
     Interest rates,
     Lien positions,
     Collateral,
     Delinquency actions,
     Diversification, and

[[Page 80869]]

     Due diligence procedures.
    Once we have made these contacts with each interested investor, 
USDA will hold one or more meetings, as necessary. It is expected that 
these meetings will occur over a one- to-two month period.
    USDA believes that, in order for this effort to be successful, each 
participating investor:
     Should be a well-established investor, including, but not 
limited to, entities such as pension funds, commercial banking 
institutions, insurance investment funds, foundational endowments, or 
family offices;
     Interested in investing in low risk, rural infrastructure 
as part of a larger portfolio;
     Willing to commit funds for the long term (e.g., 20+ 
years); and
     Interested in participating in a limited number of 
interviews and panels as we shape this initiative with USDA.

Interested Entities

    If you are interested in the formation of, and participation in, 
this effort for increasing access to capital for community facility 
projects in rural America, please provide the following information to 
Doug O'Brien, as specified in the ADDRESSES section of this Notice, on 
or before January 26, 2012:
     Name of Institution,
     Headquarters Mailing Address,
     Contact Name and Title,
     Contact Mailing Address,
     Contact Telephone Number(s), and
     Contact Email Address.

Thomas J. Vilsack,
Secretary.
[FR Doc. 2011-33111 Filed 12-23-11; 8:45 am]
BILLING CODE 3410-01-P