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U.S. Code as of:
01/19/04
Section 1103. Approval of loan guarantees
(a) Authority to approve loan guarantees
Subject to the provisions of this section and consistent with the
purpose of this chapter, the Board may approve loan guarantees
under this chapter.
(b) Regulations
(1) Requirements
The Administrator (as defined in section 1104 of this title),
under the direction of and for approval by the Board, shall
prescribe regulations to implement the provisions of this chapter
and shall do so not later than 120 days after funds authorized to
be appropriated under section 1109 of this title have been
appropriated in a bill signed into law.
(2) Elements
The regulations prescribed under paragraph (1) shall -
(A) set forth the form of any application to be submitted to
the Board under this chapter;
(B) set forth time periods for the review and consideration
by the Board of applications to be submitted to the Board under
this chapter, and for any other action to be taken by the Board
with respect to such applications;
(C) provide appropriate safeguards against the evasion of the
provisions of this chapter;
(D) set forth the circumstances in which an applicant,
together with any affiliate of an applicant, shall be treated
as an applicant for a loan guarantee under this chapter;
(E) include requirements that appropriate parties submit to
the Board any documents and assurances that are required for
the administration of the provisions of this chapter; and
(F) include such other provisions consistent with the purpose
of this chapter as the Board considers appropriate.
(3) Construction
(A) Nothing in this chapter shall be construed to prohibit the
Board from requiring, to the extent and under circumstances
considered appropriate by the Board, that affiliates of an
applicant be subject to certain obligations of the applicant as a
condition to the approval or maintenance of a loan guarantee
under this chapter.
(B) If any provision of this chapter or the application of such
provision to any person or entity or circumstance is held to be
invalid by a court of competent jurisdiction, the remainder of
this chapter, or the application of such provision to such person
or entity or circumstance other than those as to which it is held
invalid, shall not be affected thereby.
(c) Authority limited by appropriations acts
The Board may approve loan guarantees under this chapter only to
the extent provided for in advance in appropriations Acts, and the
Board may accept credit risk premiums from a non-Federal source in
order to cover the cost of a loan guarantee under this chapter, to
the extent that appropriations of budget authority are insufficient
to cover such costs.
(d) Requirements and criteria applicable to approval
(1) In general
The Board shall utilize the underwriting criteria developed
under subsection (g) of this section, and any relevant
information provided by the departments and agencies with which
the Board consults under section 1102 of this title, to determine
which loans may be eligible for a loan guarantee under this
chapter.
(2) Prerequisites
In addition to meeting the underwriting criteria under
paragraph (1), a loan may not be guaranteed under this chapter
unless -
(A) the loan is made to finance the acquisition, improvement,
enhancement, construction, deployment, launch, or
rehabilitation of the means by which local television broadcast
signals will be delivered to a nonserved area or underserved
area;
(B) the proceeds of the loan will not be used for operating,
advertising, or promotion expenses, or for the acquisition of
licenses for the use of spectrum in any competitive bidding
under section 309(j) of this title;
(C) the proposed project, as determined by the Board in
consultation with the National Telecommunications and
Information Administration, is not likely to have a substantial
adverse impact on competition that outweighs the benefits of
improving access to the signals of a local television station
in a nonserved area or underserved area and is commercially
viable;
(D)(i) the loan -
(I) is provided by any entity engaged in the business of
commercial lending -
(aa) if the loan is made in accordance with
loan-to-one-borrower and affiliate transaction restrictions
to which the entity is subject under applicable law; or
(bb) if item (aa) does not apply, the loan is made only
to a borrower that is not an affiliate of the entity and
only if the amount of the loan and all outstanding loans by
that entity to that borrower and any of its affiliates does
not exceed 10 percent of the net equity of the entity; or
(II) is provided by a nonprofit corporation, including the
National Rural Utilities Cooperative Finance Corporation,
engaged primarily in commercial lending, if the Board
determines that such nonprofit corporation has one or more
issues of outstanding long-term debt that is rated within the
highest 3 rating categories of a nationally recognized
statistical rating organization;
(ii) if the loan is provided by a lender described in clause
(i)(II) and the Board determines that the making of the loan by
such lender will cause a decline in such lender's debt rating
as described in that clause, the Board at its discretion may
disapprove the loan guarantee on this basis;
(iii) no loan may be made for purposes of this chapter by a
governmental entity or affiliate thereof, or by the Federal
Agricultural Mortgage Corporation, or any institution
supervised by the Office of Federal Housing Enterprise
Oversight, the Federal Housing Finance Board, or any affiliate
of such entities;
(iv) any loan must have terms, in the judgment of the Board,
that are consistent in material respects with the terms of
similar obligations in the private capital market;
(v) for purposes of clause (i)(I)(bb), the term "net equity"
means the value of the total assets of the entity, less the
total liabilities of the entity, as recorded under generally
accepted accounting principles for the fiscal quarter ended
immediately prior to the date on which the subject loan is
approved;
(E) repayment of the loan is required to be made within a
term of the lesser of -
(i) 25 years from the date of the execution of the loan; or
(ii) the economically useful life, as determined by the
Board or in consultation with persons or entities deemed
appropriate by the Board, of the primary assets to be used in
the delivery of the signals concerned; and
(F) the loan meets any additional criteria developed under
subsection (g) of this section.
(3) Protection of United States financial interests
The Board may not approve the guarantee of a loan under this
chapter unless -
(A) the Board has been given documentation, assurances, and
access to information, persons, and entities necessary, as
determined by the Board, to address issues relevant to the
review of the loan by the Board for purposes of this chapter;
and
(B) the Board makes a determination in writing that -
(i) to the best of its knowledge upon due inquiry, the
assets, facilities, or equipment covered by the loan will be
utilized economically and efficiently;
(ii) the terms, conditions, security, and schedule and
amount of repayments of principal and the payment of interest
with respect to the loan protect the financial interests of
the United States and are reasonable;
(iii) the value of collateral provided by an applicant is
at least equal to the unpaid balance of the loan amount
covered by the loan guarantee (the "Amount" for purposes of
this clause); and if the value of collateral provided by an
applicant is less than the Amount, the additional required
collateral is provided by any affiliate of the applicant;
(iv) all necessary and required regulatory and other
approvals, spectrum licenses, and delivery permissions have
been received for the loan and the project under the loan;
(v) the loan would not be available on reasonable terms and
conditions without a loan guarantee under this chapter; and
(vi) repayment of the loan can reasonably be expected.
(e) Considerations
(1) Type of market
(A) Priority considerations
To the maximum extent practicable, the Board shall give
priority in the approval of loan guarantees under this chapter
in the following order:
(i) First, to projects that will serve households in
nonserved areas. In considering such projects, the Board
shall balance projects that will serve the largest number of
households with projects that will serve remote, isolated
communities (including noncontiguous States) in areas that
are unlikely to be served through market mechanisms.
(ii) Second, to projects that will serve households in
underserved areas. In considering such projects, the Board
shall balance projects that will serve the largest number of
households with projects that will serve remote, isolated
communities (including noncontiguous States) in areas that
are unlikely to be served through market mechanisms.
Within each category, the Board shall consider the project's
estimated cost per household and shall give priority to those
projects that provide the highest quality service at the lowest
cost per household.
(B) Additional consideration
The Board should give additional consideration to projects
that also provide high-speed Internet service.
(C) Prohibitions
The Board may not approve a loan guarantee under this chapter
for a project that -
(i) is designed primarily to serve 1 or more of the top 40
designated market areas (as that term is defined in section
122(j) of title 17); or
(ii) would alter or remove National Weather Service
warnings from local broadcast signals.
(2) Other considerations
The Board shall consider other factors, which shall include
projects that would -
(A) offer a separate tier of local broadcast signals, but for
applicable Federal, State, or local laws or regulations;
(B) provide lower projected costs to consumers of such
separate tier; and
(C) enable the delivery of local broadcast signals consistent
with the purpose of this chapter by a means reasonably
compatible with existing systems or devices predominantly in
use.
(3) Further consideration
In implementing this chapter, the Board shall support the use
of loan guarantees for projects that would serve households not
likely to be served in the absence of loan guarantees under this
chapter.
(f) Guarantee limits
(1) Limitation on aggregate value of loans
The aggregate value of all loans for which loan guarantees are
issued under this chapter (including the unguaranteed portion of
such loans) may not exceed $1,250,000,000.
(2) Guarantee level
A loan guarantee issued under this chapter may not exceed an
amount equal to 80 percent of a loan meeting in its entirety the
requirements of subsection (d)(2)(A) of this section. If only a
portion of a loan meets the requirements of that subsection, the
Board shall determine that percentage of the loan meeting such
requirements (the "applicable portion") and may issue a loan
guarantee in an amount not exceeding 80 percent of the applicable
portion.
(g) Underwriting criteria
Within the period provided for under subsection (b)(1) of this
section, the Board shall, in consultation with the Director of the
Office of Management and Budget and an independent public
accounting firm, develop underwriting criteria relating to the
guarantee of loans that are consistent with the purpose of this
chapter, including appropriate collateral and cash flow levels for
loans guaranteed under this chapter, and such other matters as the
Board considers appropriate.
(h) Credit risk premiums
(1) Establishment and acceptance
(A) In general
The Board may establish and approve the acceptance of credit
risk premiums with respect to a loan guarantee under this
chapter in order to cover the cost, as defined in section
661a(5) of title 2, of the loan guarantee. To the extent that
appropriations of budget authority are insufficient to cover
the cost, as so determined, of a loan guarantee under this
chapter, credit risk premiums shall be accepted from a
non-Federal source under this subsection on behalf of the
applicant for the loan guarantee.
(B) Authority limited by appropriations Acts
Credit risk premiums under this subsection shall be imposed
only to the extent provided for in advance in appropriations
Acts.
(2) Credit risk premium amount
(A) In general
The Board shall determine the amount of any credit risk
premium to be accepted with respect to a loan guarantee under
this chapter on the basis of -
(i) the financial and economic circumstances of the
applicant for the loan guarantee, including the amount of
collateral offered;
(ii) the proposed schedule of loan disbursements;
(iii) the business plans of the applicant for providing
service;
(iv) any financial commitment from a broadcast signal
provider; and
(v) the concurrence of the Director of the Office of
Management and Budget as to the amount of the credit risk
premium.
(B) Proportionality
To the extent that appropriations of budget authority are
sufficient to cover the cost, as determined under section
661a(5) of title 2, of loan guarantees under this chapter, the
credit risk premium with respect to each loan guarantee shall
be reduced proportionately.
(C) Payment of premiums
Credit risk premiums under this subsection shall be paid to
an account (the "Escrow Account") established in the Treasury
which shall accrue interest and such interest shall be retained
by the account, subject to subparagraph (D).
(D) Deductions from Escrow Account
If a default occurs with respect to any loan guaranteed under
this chapter and the default is not cured in accordance with
the terms of the underlying loan or loan guarantee agreement,
the Administrator, in accordance with subsections (i) and (j)
of section 1104 of this title, shall liquidate, or shall cause
to be liquidated, all assets collateralizing such loan as to
which it has a lien or security interest. Any shortfall between
the proceeds of the liquidation net of costs and expenses
relating to the liquidation, and the guarantee amount paid
pursuant to this chapter shall be deducted from funds in the
Escrow Account and credited to the Administrator for payment of
such shortfall. At such time as determined under subsection
(d)(2)(E) of this section when all loans guaranteed under this
chapter have been repaid or otherwise satisfied in accordance
with this chapter and the regulations promulgated hereunder,
remaining funds in the Escrow Account, if any, shall be
refunded, on a pro rata basis, to applicants whose loans
guaranteed under this chapter were not in default, or where any
default was cured in accordance with the terms of the
underlying loan or loan guarantee agreement.
(i) Limitations on guarantees for certain cable operators
Notwithstanding any other provision of this chapter, no loan
guarantee under this chapter may be granted or used to provide
funds for a project that extends, upgrades, or enhances the
services provided over any cable system to an area that, as of
December 21, 2000, is covered by a cable franchise agreement that
expressly obligates a cable system operator to serve such area.
(j) Judicial review
The decision of the Board to approve or disapprove the making of
a loan guarantee under this chapter shall not be subject to
judicial review.
(k) Applicability of APA
Except as otherwise provided in subsection (j) of this section,
the provisions of subchapter II of chapter 5 and chapter 7 of title
5 (commonly referred to as the Administrative Procedure Act), shall
apply to actions taken under this chapter.
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