[Code of Federal Regulations]
[Title 49, Volume 4]
[Revised as of October 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 49CFR260.17]

[Page 705]
 
                        TITLE 49--TRANSPORTATION
 
       CHAPTER II--FEDERAL RAILROAD ADMINISTRATION, DEPARTMENT OF 
                             TRANSPORTATION
 
PART 260--REGULATIONS GOVERNING LOANS AND LOAN GUARANTEES UNDER THE RAILROAD REHABILITATION AND IMPROVEMENT FINANCING PROGRAM--Table of Contents
 
 Subpart B--FRA Policies and Procedures for Evaluating Applications for 
                          Financial Assistance
 
Sec. 260.17  Credit risk premium analysis.


    (a) When Federal appropriations are not available to cover the total 
subsidy cost, the Administrator will determine the Credit Risk Premium 
necessary for each direct loan or loan guarantee by estimating the 
credit risk and the potential recovery in the event of a default of each 
project evaluating the factors described in paragraphs (b) and (c) of 
this section.
    (b) Establishing the credit risk.
    (1) Where an Applicant has received a recent credit rating from one 
or more nationally recognized rating agencies, that rating will be used 
to estimate the credit risk.
    (2) Where an Applicant has not received a credit rating from a 
credit rating agency, the Administrator will determine the credit risk 
based on an evaluation of the following factors:
    (i) Business risk, based on Applicant's:
    (A) Industry outlook;
    (B) Market position;
    (C) Management and financial policies;
    (D) Capital expenditures; and
    (E) Operating efficiency.
    (ii) Financial risk, based on Applicant?s past and projected:
    (A) Profitability;
    (B) Liquidity;
    (C) Financial strength;
    (D) Size; and
    (E) Level of capital expenditures; and
    (iii) Project risk, based on the proposed project's:
    (A) Potential for improving revenues, profitability and cash flow 
from operations; and
    (B) Reliance on third parties for success.
    (c) The potential recovery in the event of a default will be based 
on:
    (1) The nature of the Applicant's assets; and
    (2) Liquidation value of the collateral offered, including the terms 
and conditions of the lien securing the collateral.