[Code of Federal Regulations]
[Title 7, Volume 11]
[Revised as of January 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR1710.110]
[Page 104-106]
TITLE 7--AGRICULTURE
CHAPTER XVII--RURAL UTILITIES SERVICE, DEPARTMENT OF AGRICULTURE
PART 1710--GENERAL AND PRE-LOAN POLICIES AND PROCEDURES COMMON TO ELECTRIC LOANS AND GUARANTEES--Table of Contents
Subpart C--Loan Purposes and Basic Policies
Sec. 1710.110 Supplemental financing.
(a) Except in the case of financial hardship as determined by the
Administrator, and following certain mergers, consolidations, and
transfers of systems substantially in their entirety as set forth in 7
CFR 1717.154, applicants for a municipal rate loan will be required to
obtain a portion of their loan funds from a supplemental source without
an RUS guarantee, in the amounts set forth in paragraph (c) of this
section. RUS will normally grant a lien accommodation to the
supplemental lender. RUS does not require supplemental financing in
conjunction with an RUS guaranteed loan. However, if a borrower elects
to obtain supplemental financing in conjunction with a guaranteed loan,
the granting of RUS's loan guarantee may be conditioned on the
borrower's obtaining supplemental financing.
(b) The terms and conditions of supplemental financing and any
security offered to the supplemental lender are subject to RUS approval.
Generally, supplemental loans must have the same final maturity and be
amortized in the same manner as RUS loans made concurrently. Borrowers
may elect to repay the loans either in substantially equal periodic
installments covering interest and principal, or in periodic
installments that include interest and level amortization of principal.
(c) Supplemental financing required for municipal rate loans--(1)
Distribution borrowers. (i) Distribution borrowers that had, as of
December 31, 1980, an average consumer density of 2 or fewer consumers
per mile or an average adjusted plant revenue ratio (APRR), as defined
in Sec. 1710.2, of over 9.0 shall obtain supplemental financing equal to
10 percent of their loan request.
(ii) All other distribution borrowers must obtain supplemental
financing according to their plant revenue ratio (PRR), as defined in
Sec. 1710.2, based on the most recent year-end data available on the
date of loan approval, as follows:
[[Page 105]]
------------------------------------------------------------------------
Supplemental loan
PRR percentage
------------------------------------------------------------------------
9.00 and above....................................... 10
8.01-8.99............................................ 20
8.00 and below....................................... 30
------------------------------------------------------------------------
(iii) If a distribution borrower enters into a merger,
consolidation, or transfer of system substantially in its entirety, and
the provisions of 7 CFR 1717.154(b) do not apply, required supplemental
financing will be determined as follows for loans approved by RUS after
December 19, 1996. If one of the merging parties met the criteria in
paragraph (c)(1)(i) of this section prior to the effective date of the
merger consolidation or transfer, the borrower will be required to
obtain supplemental financing equal to 10 percent of any loan funds
requested for facilities to serve consumers located in the territory
formerly served by the ``paragraph (c)(1)(i)'' borrower. The required
amount of supplemental financing for the rest of the loan will be
determined according to the provisions of paragraph (c)(1)(ii) of this
section.
(2) Power supply borrowers. The supplemental loan proportion
required of a power supply borrower is based on the simple arithmetic
mean of the supplemental loan proportions required of the borrower's
distribution members.
(3) Subsequent loans. (i) If more than 5 percent of an insured loan
made prior to November 1, 1993, or of a municipal rate loan is
terminated or rescinded, the amount of supplemental financing required
in the borrower's next loan after the rescission for which supplemental
financing is required, pursuant to paragraph (a) of this section, will
be adjusted to average the actual supplemental financing portion on the
terminated or rescinded loan with the supplemental financing portion
that would have been required on the new loan according to paragraphs
(c)(1) and (2) of this section, in accordance with the formulas set
forth in paragraphs (c)(3)(ii) and (iii) of this section.
(ii) If a borrower's supplemental financing requirement as set forth
in paragraphs (a), (c)(1), and (c)(2) of this section has not changed
between the most recent loan and the loan being considered, then the
amount of supplemental financing required for the new loan will be
computed as follows:
Supplemental financing amount, new loan = [(A + B) x C] - D
where:
A = The total funds ($) actually advanced from the first loan, including
both RUS loan funds and funds from the supplemental loan, plus any
unadvanced funds still available to the borrower after the rescission.
B = The total amount ($) for facilities of the new loan request,
including both RUS loan funds and funds from supplemental loans.
C = The proportion (%) of supplemental financing required on the loans
according to paragraphs (a), (c)(1) and (c)(2) of this section.
D = The amount ($) of supplemental funds actually advanced on the first
loan, plus any unadvanced supplemental funds still available to the
borrower after the rescission.
(iii) If a borrower's supplemental financing requirement as set
forth in paragraphs (a), (c)(1), and (c)(2) of this section has changed
between the most recent loan and the loan being considered, then the
amount of supplemental financing required for the new loan will be the
weighted average of the portions otherwise applicable on the two loans
and will be computed as follows:
Supplemental financing amount, new loan =
(AxC1)+(BxC2)-D
where:
A = The total funds ($) actually advanced from the first loan, including
both RUS loan funds and funds from the supplemental loan, plus any
unadvanced funds still available to the borrower after the rescission.
B = The total amount ($) for facilities of the new loan request,
including both RUS funds and funds from supplemental loans.
C1 = The proportion (%) of supplemental financing required on
the old loan according to paragraphs (a), (c)(1) and (c)(2) of this
section.
C2 = The proportion (%) of supplemental financing required on
the new loan according to paragraphs (a), (c)(1) and (c)(2) of this
section.
D = The amount ($) of supplemental funds actually advanced on the first
loan, plus any unadvanced supplemental funds still available to the
borrower after the rescission.
(d) Supplemental financing will not be required in connection with
hardship rate loans. Borrowers that qualify for hardship rate loans but
elect to take municipal rate loans instead, will
[[Page 106]]
be required to obtain supplemental financing pursuant to this section,
unless at the time of loan approval, there are no funds remaining
available for hardship loans, in which case supplemental financing will
not be required.
[57 FR 1053, Jan. 9, 1992, as amended at 58 FR 66265, Dec. 20, 1993; 60
FR 3730, Jan. 19, 1995; 61 FR 66870, Dec. 19, 1996]