[Code of Federal Regulations]

[Title 14, Volume 5]

[Revised as of January 1, 2006]

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

[CITE: 14CFR1300.17]



[Page 525-527]

 

                     TITLE 14--AERONAUTICS AND SPACE

 

           CHAPTER VI--AIR TRANSPORTATION SYSTEM STABILIZATION

 

PART 1300_AVIATION DISASTER RELIEF_AIR CARRIER GUARANTEE LOAN PROGRAM

--Table of Contents

 

        Subpart B_Minimum Requirements and Application Procedures

 

Sec. 1300.17  Application evaluation.



    (a) Eligibility screening. Applications will be reviewed to 

determine whether the lender and borrower are eligible, the information 

required under Sec. 1300.16(b) is complete, and the proposed loan 

complies with applicable statutes and regulations. The Board may at any 

time reject an application that does not meet these requirements.

    (b) Evaluation criteria. Applications that are determined to be 

eligible pursuant to paragraph (a) of this section shall be subject to a 

substantive review by the Board. In addition to the general standards 

for Board issuance of Federal credit instruments set forth in



[[Page 526]]



Sec. 1300.10, the Board shall consider the following evaluation 

factors:

    (1) Reasonable assurance that the borrower will be able to repay the 

loan by the date specified in the loan document, which shall be no later 

than seven years from the date on which the first disbursement of the 

loan is made;

    (2) The adequacy of the proposed provisions to protect the Federal 

Government, including sufficiency of any security provided by the 

borrower and the percentage of guarantee requested;

    (3) The ability of the lender to administer the loan in full 

compliance with the requisite standard of care. In making this 

determination, the Board will assess:

    (i) The lender's level of regulatory capital, in the case of banking 

institutions, or net worth, in the case of other institutions;

    (ii) Whether the lender possesses the ability to administer the 

loan, including its experience with loans to air carriers; and

    (iii) Any other matter the Board deems material to its assessment of 

the lender; and

    (4) The ability of the borrower to demonstrate, to the Board's 

satisfaction, one or more of the following criteria. The Board shall 

give preference to applications that satisfy one or more of these 

criteria, giving greater preference to those applications that meet the 

greatest number of these criteria, as follows:

    (i) A demonstration that the air carrier has presented a plan 

demonstrating that its business plan is financially sound;

    (ii) A demonstration of greater participation in the loan by non-

Federal entities;

    (iii) A demonstration of greater participation in the loan by 

private entities, as opposed to public non-Federal entities;

    (iv) A demonstration that the proposed instruments would ensure that 

the Federal Government will, contingent on the financial success of the 

air carrier, participate in the gains of the air carrier and its 

security holders;

    (v) A demonstration of concessions by the air carrier's security 

holders, other creditors, or employees that will improve the financial 

condition of the air carrier in a manner that will enable it to repay 

the loan in accordance with its terms and provide commercial air 

services on a financially sound basis after repayment;

    (vi) A demonstration that guaranteed loan proceeds will be used for 

a purpose other than the payment or refinancing of existing debt;

    (vii) A demonstration that the proposed instruments contain 

financial structures that minimize the Federal government's risk and 

cost associated with making loan guarantees. Examples include, but are 

not limited to, requests for guarantees that contain the following:

    (A) A maturity period that is less than the maximum permitted under 

the rules in this part;

    (B) Pledges of collateral;

    (C) Agreements by the borrower's parent or other entities to 

reimburse the Federal government for any payments that the Federal 

government may make under the guarantee;

    (D) A grant to the Federal government of favorable priority in the 

event of bankruptcy reflecting other creditors' agreement to subordinate 

their debts as a condition of the loan guarantee;

    (E) Limitation of the borrower's issuance of dividends and/or the 

borrower's payments to its parent or subsidiaries or related companies;

    (F) Limitation of the borrower's ability to incur additional debt, 

and/or the borrower's ability to incur capital expenditures, beyond that 

set forth in the business and financial plans that the Borrower 

submitted with the application;

    (G) A demonstration of reasonable liquidity;

    (H) A demonstration of favorable debt ratios; and

    (I) A demonstration that any proceeds raised from private sector 

financing subsequent to disbursement of the federally guaranteed loan be 

used to repay the federally guaranteed loan.

    (c) No guarantee will be made if either the borrower or lender has 

an outstanding delinquent Federal debt, including tax liabilities, 

until:

    (1) The delinquent debt has been paid in full;



[[Page 527]]



    (2) A negotiated repayment schedule is established; or

    (3) Other arrangements, satisfactory to the agency responsible for 

collecting the debt are made.

    (d) Decisions by the Board. The Board shall approve or deny 

applications received on or before June 28, 2002, in a timely manner as 

such applications are received. The Board may limit the amount of a loan 

guarantee made to initial applicants to ensure that sufficient funds 

remain available for subsequent applicants. The Board shall notify the 

borrower in writing of the approval or denial of an application. 

Approvals for loan guarantees shall be conditioned upon compliance with 

Sec. 1300.18.