[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: 7CFR1735.43]

[Page 315-316]
 
                          TITLE 7--AGRICULTURE
 
    CHAPTER XVII--RURAL UTILITIES SERVICE, DEPARTMENT OF AGRICULTURE
 
PART 1735--GENERAL POLICIES, TYPES OF LOANS, LOAN REQUIREMENTS--TELECOMMUNICATIONS PROGRAM--Table of Contents
 
                        Subpart D--Terms of Loans
 
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

[[Page 316]]

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.
    (f) Principal and interest will be repaid in accordance with the 
terms of the notes. Generally, interest is payable each month as it 
accrues. Principal payments on each note generally are scheduled to 
begin 2 years after the date of the note. After this deferral period, 
interest and principal payments on all funds advanced during this 2-year 
period are scheduled in equal monthly installments. Principal payments 
on funds advanced 2 years or more after the date of the note will begin 
with the first billing after the advance. The interest and principal 
payments on each of these advances will be scheduled in equal monthly 
installments. This CFR part supersedes those portions of RUS Bulletin 
320-12, ``Loan Payments and Statements'' with which it is in conflict.

[56 FR 26598, June 10, 1991, as amended at 62 FR 46871, Sept. 5, 1997]