[Code of Federal Regulations]

[Title 49, Volume 4]

[Revised as of October 1, 2005]

From the U.S. Government Printing Office via GPO Access

[CITE: 49CFR260.17]



[Page 812]

 

                        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.