[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: 7CFR1735.70]

[Page 319-320]
 
                          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 G--Acquisitions Involving Loan Funds
 
Sec. 1735.70  Use of loan funds.

    Source: 54 FR 14626, Apr. 12, 1989, unless otherwise noted. 
Redesignated at 55 FR 39395, Sept. 27, 1990.


    (a) See 7 CFR part 1735 and 1737 for RUS's general loan policies and 
requirements.
    (b) RUS will finance an acquisition by a borrower only when the 
acquisition is necessary and incidental to furnishing or improving rural 
telephone service and the service area is eligible for RUS assistance.
    (c) RUS does not make loans for the sole purpose of merging or 
consolidating telephone organizations. After a merger or consolidation, 
RUS will consider making loans to the telephone system to finance the 
improvement or extension of telephone service in rural areas.
    (d) Generally, RUS will not make a loan for the acquisition of an 
existing borrower unless, in addition to all other requirements, such 
acquisition

[[Page 320]]

will improve the likelihood of repayment of an outstanding RUS loan and 
all outstanding balances of the previous RUS loans are paid in full.
    (e) In determining the amount it will lend for each acquisition, RUS 
shall place a valuation on all telephone facilities that are to be 
acquired with loan funds. RUS may consider fair market value, the 
original cost less depreciation of the facilities, income generating 
potential, any improvement in the financial strength of the borrower as 
a result of the acquisition, and any other factors deemed relevant by 
RUS to determine the reasonableness of the acquisition price and the 
amount of loan funds RUS will provide for an acquisition. RUS shall not 
consider the acquisition price reasonable or approve a loan if, in the 
Administrator's opinion, the acquisition price will endanger financial 
feasibility. If the acquisition price exceeds the amount RUS will lend, 
the borrower provides the remainder.
    (f) When a borrower intends to request RUS loan funds for an 
acquisition, it shall present a proposal in writing to the Area Office 
as soon as possible. The borrower must either obtain RUS approval prior 
to making any binding commitments with the seller or make the 
commitments subject to RUS's approval. Failure to comply with these 
requirements will disqualify the borrower from obtaining an RUS loan for 
the acquisition unless the Administrator determines there were 
extenuating circumstances.