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U.S. Code as of:
01/19/04
Section 662. Guarantee of certificates
(a) Authority of Secretary; prerequisites; procedures; waiver
The trustees of any railroad undergoing reorganization under
section 77 of the Bankruptcy Act, as amended, upon approval of the
court, may apply to the Secretary for the guarantee of
certificates. The Secretary, after consultation with the Board, is
authorized to guarantee such certificates upon findings in writing
that -
(1) cessation of essential transportation services by the
railroad would endanger the public welfare;
(2) cessation of such services is imminent;
(3) there is no other practicable means of obtaining funds to
meet payroll and other expenses necessary to provide such
services than the issuance of such certificates;
(4) such certificates cannot be sold without a guarantee;
(5) the railroad can reasonably be expected to become
self-sustaining; and
(6) the probable value of the assets of the railroad in the
event of liquidation provides reasonable protection to the United
States.
The Secretary shall publish notice of his intention to make such
finding in the Federal Register not less than fifteen days prior to
such finding, give interested persons, including agencies of the
Federal Government, an opportunity to submit written data, views,
or arguments (with or without opportunity for oral presentation),
and give consideration to the relevant matter presented. The
Secretary for good cause shown and upon a finding that
extraordinary circumstances warrant doing so may waive the
requirements of the preceding sentence. Notwithstanding any other
provision of this section, the Secretary, in guaranteeing
certificates under this section, is authorized to waive the
findings required by paragraphs (1), (5), and (6) of this
subsection.
(b) Conditions to guarantee
As a condition to a guarantee, the Secretary, after consultation
with the Board, shall require that:
(1) the proceeds of the sale of certificates guaranteed under
this chapter, will be used solely for meeting payroll and other
expenses which, if not met, would preclude continued provision of
essential transportation services by the railroad;
(2) other revenues of the railroad will be used, to the fullest
extent possible, for such expenses;
(3) proceeds from the sale of assets will be devoted to the
fullest extent possible to the provision of essential
transportation services by the railroad; and
(4) in the event of actual or threatened cessation of essential
transportation services by the railroad, the Secretary shall have
the option to procure by purchase or lease trackage rights over
the lines of the railroad and such equipment as may be necessary
to provide such services by the Secretary or his assignee, and,
in the event of a default in the payment of principal or interest
as provided by the certificates, the money paid or expenses
incurred by the United States as a result thereof shall be deemed
to have been applied to the purchase or lease price. The terms of
purchase or lease shall be subject to the approval of the
reorganization court and the operation over the lines shall be
subject to the approval of the Board pursuant to subchapter II of
chapter 113 of title 49, but in no event shall the rendition of
services by the Secretary or his assignee await the outcome of
proceedings before the reorganization court or the Board.
(c) Certificate as administrative expense; priority of certificate
The Secretary shall not guarantee any certificate under this
section unless such certificate is treated as an expense of
administration and receives the highest lien on the railroad's
property and priority in payment under the Bankruptcy Act, except
that this subsection shall not apply to certificates guaranteed for
a railroad that is actively engaged in restructuring, as defined by
the Secretary. For purposes of this subsection, the term
"restructuring" includes an employee ownership plan or an
employee-shipper ownership plan.
(d) Interest rate; date of maturity; other terms and conditions
A certificate under this chapter shall bear interest at such per
annum rate as the Secretary deems reasonable, taking into account
the range of interest rates prevailing in the private market for
similar loans and the risks assumed by the Federal Government; nor
may its maturity date, including all extensions and renewals
thereof, be later than fifteen years from the date of original
issuance. The Secretary may prescribe such other terms and
conditions as he deems appropriate. In each case, the Secretary
shall consider the feasibility of requiring the railroad to dispose
of nonrailroad assets as a condition to a guarantee.
(e) Maximum aggregate principal amount outstanding
At any one time the outstanding aggregate principal amount of all
certificates guaranteed under this chapter shall not exceed
$200,000,000.
(f) Rules and regulations
The Secretary shall issue such rules and regulations as are
appropriate to carry out the authority granted by this chapter.
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