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Federal Register / Vol. 71, No.

110 / Thursday, June 8, 2006 / Rules and Regulations 33181

PART 979—[REMOVED] accepted accounting principles do not Paperwork Elimination Act, which
reflect the current market value of real requires Government agencies, in
■ For the reasons set forth in the property assets owned by the borrower. general, to provide the public the option
preamble, and under the authority of 7 In the case of all direct or guaranteed of submitting information or transacting
U.S.C. 601–674, 7 CFR part 979 is loan applications, the tangible net business electronically to the maximum
removed. equity calculation may include a extent possible.
Dated: June 2, 2006. restricted universe of qualified
intellectual property. The Agency is also Environmental Impact Statement
Lloyd C. Day,
Administrator, Agricultural Marketing increasing the equity requirements It is the determination of the Agency
Service. applicable to energy businesses. that this action is not a major Federal
[FR Doc. E6–8895 Filed 6–7–06; 8:45 am] EFFECTIVE DATE: July 10, 2006. action significantly affecting the
FOR FURTHER INFORMATION CONTACT: Fred environment. Therefore, in accordance
BILLING CODE 3410–02–P
Kieferle, Rural Business-Cooperative with the National Environmental Policy
Service, USDA, Stop 3224, Room 6845, Act of 1969, an Environmental Impact
DEPARTMENT OF AGRICULTURE 1400 Independence Ave., SW., Statement is not required.
Washington, DC 20250–3224, Executive Order 12988
Rural Business-Cooperative Service Telephone (202) 720–7818, Fax (202)
This final rule has been reviewed in
720–6003, or E-mail:
7 CFR Parts 1980 and 4279 fred.kieferle@wdc.usda.gov. accordance with E.O. 12988, Civil
Justice Reform. In accordance with this
RIN 0570–AA49 SUPPLEMENTARY INFORMATION: rule: (1) All state and local laws and
Classification regulations that are in conflict with this
Business and Industry Guaranteed
Loans—Tangible Balance Sheet Equity rule will be preempted; (2) no
This final rule has been determined to retroactive effect will be given to this
AGENCY: Rural Business-Cooperative be not significant for purposes of rule; and (3) administrative proceedings
Service, USDA. Executive Order (E.O.) 12866 and, in accordance with 7 CFR part 11 must
therefore, has not been reviewed by the be exhausted before bringing suit in
ACTION: Final rule.
Office of Management and Budget. court challenging action taken under
SUMMARY: In this final rule the Rural Programs Affected this rule unless those regulations
Business-Cooperative Service (the specifically allow bringing suit at an
Agency) amends existing regulations The Catalog of Federal Domestic
Assistance Program number assigned to earlier time.
relating to Business and Industry (B&I)
loans made or guaranteed by the Agency the applicable programs is 10.768, Unfunded Mandates Reform Act of
by modifying the provisions that Business and Industry Loans. 1995
address the evaluation of credit quality. Program Administration Title II of the Unfunded Mandates
Changes to these underwriting Reform Act of 1995 (UMRA) establishes
These programs are administered
provisions were originally proposed on requirements for Federal agencies to
through the Business and Industry
January 16, 2004. The scope of this final assess the effects of their regulatory
rule is more limited than originally Division of the Rural Business-
Cooperative Service within the Rural actions on state, local, and tribal
proposed but also implements a change governments and the private sector.
not originally discussed in the proposed Development mission area of USDA and
delivered via the USDA Rural Under section 202 of the UMRA, USDA
rule. Specifically, in the case of the must prepare a written statement,
refinancing of USDA or other Federal Development State Directors.
including a cost benefit analysis, for
agency debt only, the Agency is Executive Order 12372 proposed and final rules with ‘‘Federal
modifying the definition of tangible As stated in the Notice related to 7 mandates’’ that may result in
balance sheet equity to include the off CFR part 3015, subpart V, the programs expenditures to state, local or tribal
balance sheet value of tangible assets to and activities within this rule are governments, in the aggregate, or to the
the extent of the difference between the subject to E.O. 12372 which requires private sector, of $100 million or more
depreciated book value of real property intergovernmental consultation in the in any one year. When such a statement
assets and their current market value manner delineated in 7 CFR part 3015, is needed for a rule, section 205 of
supported by an appraisal or the subpart V. Accordingly, agency UMRA generally requires USDA to
original book value, whichever is less. personnel advise all prospective identify and consider a reasonable
In these limited cases, the adjusted applicants of whether their state has number of regulatory alternatives and
tangible balance sheet equity will also elected to participate in the consultation adopt the least costly, more cost
include qualified subordinated debt process by designating a single point of effective or least burdensome alternative
owed to the owner. As stated above, contact and name of that contact point. that achieves the objectives of the rule.
these adjustments to the equity This rule contains no Federal
calculation will apply only in cases Paperwork Reduction Act mandates (under the regulatory
where the Agency is asked to guarantee In accordance with the Paperwork provisions of title II of the UMRA) for
a refinancing of outstanding debt Reduction Act of 1995, the information state, local, and tribal governments or
currently owed to or guaranteed by a collection requirements contained in the private sector. Therefore this rule is
Federal agency, including the Small this regulation have been approved by not subject to the requirements of
Business Administration. The intended OMB under control numbers 0570–0014 sections 202 and 205 of UMRA.
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effect of this action is to facilitate and 0570–0017.


Agency guarantees of certain Regulatory Flexibility Act
refinancing loans that otherwise would Government Paperwork Elimination In compliance with the Regulatory
not meet the equity requirements Act Flexibility Act (5 U.S.C. 601–612), the
because the financial statements The Agency is committed to undersigned has determined and
prepared in accordance with generally compliance with the Government certified by signature of this document

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33182 Federal Register / Vol. 71, No. 110 / Thursday, June 8, 2006 / Rules and Regulations

that this rule will not have a significant economic, social and physical problems In this final rule, the Agency has elected
economic impact on a substantial in their state. to allow some credit for off balance
number of small entities. Some sheet appreciation in real property as
I. Background
provisions published as a part of this well as certain subordinated debt in this
rule are, in fact, a benefit to small The current loan processing agency-defined formula for tangible
entities. regulations for the B&I Guaranteed Loan balance sheet equity. This final rule
The modified equity test in the case Program provide that the lender is provides that a restricted universe of
of refinancing applies equally to large primarily responsible for determining intellectual property assets may be
and small entities, but in practice, the credit quality and must address all of included in this adjusted equity
Agency expects it to benefit smaller the elements of credit quality in a calculation as well. Whereas the real
entities disproportionately more than written credit analysis. The Agency property asset appreciation and
larger businesses. In the Agency’s assumes this responsibility for the B&I subordinated owner debt provisions
experience, the largest single Direct Loan Program. One of the will apply only in the case of
component of off balance sheet value in elements of credit quality required in refinancing loans, the adjustment for
a small firm is the real property it owns. the regulation is that borrowers qualified intellectual property assets
Small firms that are real property rich, demonstrate a minimum level of will apply in the case of all
but cash flow constrained, may find this tangible balance sheet equity. The applications.
change to be the only means to achieve threshold level of required tangible Tangible balance sheet equity is a
flexibility in refinancing, while larger balance sheet equity is higher for new refinement of the GAAP concept of
businesses may have other ways, i.e., businesses than for existing businesses. equity, typically arrived at by reducing
other assets to work with, to achieve the Conventional accounting policies and balance sheet equity by the book value
same result. The scope of the final rule procedures provide for a distinction assigned to intangible assets, including
is such that a larger number of small between tangible and intangible assets. but not limited to assets such as
firms, particularly those with loans The net equity on a balance sheet goodwill, going concern value,
guaranteed by the Small Business reflects the net book value of all assets, organizational start up expenses, etc.
Administration, may be expected to after depreciation, less total liabilities. These items are recognized as capital
benefit. To the extent that any business The current regulations take a assets for purposes of GAAP but may or
has qualified intellectual property, the conservative approach in evaluating the may not be assets that can be readily
benefits of the change proposed for equity component of a balance sheet, liquidated or pledged as security for
qualified intellectual apply across the specifying that acceptable equity for loans.
board, and as such is estimated to have credit quality purposes be restricted to The modification proposed in this
no disproportionate impact, positive or tangible balance sheet equity, as defined rulemaking acknowledges that the
negative, accruing to one size of in the regulation. market value of real property assets may
business or another. Where the accounting terms used in increase at the same time the net book
The change in equity requirements for the regulation coincide with terms used value of such assets decrease. The net
energy loans may make it more difficult in generally accepted accounting book value of real property usually
for small firms to qualify. The energy principles (GAAP),1 the GAAP decreases over time due to depreciation,
business is a capital intensive business definitions are presumed in the whereas the market value of real
and the corresponding risk is greater regulation. Tangible balance sheet property may stay the same or
when it is undertaken by equity is not a term used in GAAP; there appreciate over time.
undercapitalized firms. It may be more is no commonly held definition. It is In a lower interest rate environment,
difficult for small firms to raise the perhaps more accurate to call it an refinancing is a reasonable business
necessary equity for one project, artificial construct than a term. It is strategy. The current regulation,
whereas a larger business can spread the nevertheless a concept familiar to many however, does not contemplate that any
risk across more than one project. financial analysts and regulators who credit can be given for a positive
The net effect of this rulemaking is craft customized definitions, tailored to difference between net book value and
expected to be neutral in its overall a specific industry or application, using market value for purposes of evaluating
impact on smaller firms. Accordingly, a the commonly understood terms found the equity component of credit
regulatory flexibility analysis was not in GAAP as the basic building blocks.2 worthiness when a borrower seeks
performed. Agency-guaranteed refinancing at a
1 The meaning of the term generally accepted lower interest rate. It has happened that
Executive Order 13132, Federalism accounting principles (GAAP) has evolved over borrowers that could have met a
The policies contained in this rule do time. It used to refer to widely used, but un- modified balance sheet equity test have
not have any substantial direct effect on codified, accounting policies and procedures. With
time, standard-setting bodies and professional
been foreclosed from this option
states, on the relationship between the organizations came into being and became more because the equity ratio calculated using
national government and the states, or involved in recommending preferred practices by the conventional GAAP values reported
on the distribution of power and means of issued pronouncements. Over the past on the balance sheet do not meet the
responsibilities among the various fifty years, principles were promulgated by different
groups, some of which were no longer in existence,
equity test in the current regulation at
levels of government. Nor does this rule and some conflicts exist between the various the time the refinancing is of interest to
impose substantial direct compliance pronouncements. The American Institute of the borrower. When this happens, the
costs on state and local governments. Certified Public Accountants issued a statement of borrower is tied to the existing lender
This rule is intended to foster auditing standards (SAS–69) to better organize and
clarify what is meant by GAAP. This statement
that is the beneficiary of the original
cooperation between the Federal instructs financial statement preparers, auditors and Agency guarantee on what has become
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Government and the states and local users of financial statements concerning the relative
governments, and reduces, where priority of the different sources of GAAP (past and health care service plans to maintain a minimum
possible, any regulatory burden present pronouncements by the many standard- tangible net equity and another, Federal, example
setting entities) used by auditors to judge the at 12 CFR 208.41 where tangible net equity is
imposed by the Federal Government fairness of presentation in financial statements. incorporated into the capital adequacy
that impedes the ability of states and 2 See, for example, Cal. Admin. Code title 28, requirements required of state chartered banks that
local governments to solve pressing section 1300.76, where the state requires licensed are members of the Federal Reserve system.

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Federal Register / Vol. 71, No. 110 / Thursday, June 8, 2006 / Rules and Regulations 33183

an above market rate loan. This lender in the case of refinancing requests. schedule in the case of the latter
has minimal incentive to refinance the ‘‘Subordinated owner debt’’ is defined scenario may not be more accelerated
above market rate loan, and unless the as subordinated debt owed to one or than the debt repayment schedule in
Agency can guarantee another lender more of the owners of the borrower. effect for the Agency’s B&I loan
willing to refinance the first lender’s An example that demonstrates the exposure.
exposure, the borrower is locked into practical effect of this change is as To carry our earlier example one step
the higher interest rate. It is not able to follows. XYZ Company is capitalized further, assume (1) that an owner
‘‘shop’’ for a lower interest rate. When with $200,000 cash on day 1 and uses provides $100,000 of subordinated debt
the loan in question is already $200,000 cash and $800,000 Agency to XYZ Company in year 3 so that it can
guaranteed by a Federal agency, the guaranteed debt to purchase a building purchase a patent. Also assume (2) the
taxpayer is in a position of guaranteeing for $1,000,000 on day 2. Assume (1) the market value of the building at the end
the higher interest rate when a lower building is depreciated at 10 percent a of year 3 remains at $1,200,000, (3) there
exposure could otherwise be affected year, (2) the market value of the are no other assets on the balance sheet
and there is a corresponding increased building at the end of year 2 has at the end of year 3 for purposes of this
risk of default under the guarantee. The appreciated to $1,200,000, (3) there are simplified example, and (4) the income
increased risk of default comes about no other assets on the balance sheet at statement reflects a cumulative net loss
when these higher interest rates the end of year 2 for purposes of this of ($300,000) for the first three years of
undermine the financial health of the simplified example, (4) the mortgage operations. Instead of refinancing at the
borrowers and lead to what otherwise does not begin to amortize until the end end of year two as described above, the
could be avoidable financial defaults. of year 4, and (5) the income statement Company seeks a refinancing loan
This final rule provides refinancing reflects a cumulative net loss of guarantee at the end of year three. Total
flexibility to borrowers with Federal ($200,000) for the first two years of liabilities equal the $800,000 mortgage
direct or Federally guaranteed debt operations. At the end of year 2 the debt plus $100,000 in subordinated
when the market value of the real company would like to refinance the owner debt. Tangible balance sheet
property on the balance sheet justifies a mortgage debt. Under the existing equity as defined in the current rule
more flexible approach to the equity regulation, at this point in time tangible equals total equity less the book value
requirement than is allowed by the balance sheet equity is $ -0-. Per the of intangible assets, or ($100,000) minus
current regulation. The definition of a revised regulation, however, the $100,000 = ($200,000). Per the revised
refinancing loan in this rule provides tangible balance sheet can be adjusted regulation, however, the tangible
that all of the proceeds must be used to upwards by an increment equal to the balance sheet equity can be adjusted
extinguish pre-existing debt. difference between the net book value of upwards by an increment equal to the
Accordingly, the amount of the the property ($800,000) and the lesser of difference between the net book value of
refinancing loan may not exceed the (1) its original book value ($1,000,000) the property ($700,000) and the lesser of
outstanding balance of the loan(s) to be or (2) an appraisal supported current (1) its original book value ($1,000,000)
refinanced. Where a refinancing request market value ($1,200,000). Thus, the or (2) an appraisal supported current
is coupled with a ‘‘new money’’ adjusted tangible balance sheet equity in market value ($1,200,000). Thus, the
guarantee application, the conventional, that case would be $-0-plus $200,000, or adjusted tangible balance sheet equity in
unadjusted, tangible balance sheet $200,000 for purposes of determining that case would be ($200,000) plus
equity test will be applied to the eligibility for a refinancing loan $300,000, or $100,000 for purposes of
combined guarantee request. The guarantee. In order to calculate the determining eligibility for a refinancing
modified equity calculation does not equity ratio, (equity as a percentage of loan guarantee. In order to calculate the
apply to all refinancing requests, only equity plus total liabilities), the result equity ratio, (equity as a percentage of
those pertaining to debt that is directly would be 200,000/1,000,000, or 20 equity plus total liabilities), the result
owed to a Federal agency or guaranteed percent. would be 100,000/1,000,000, or 10
by a Federal agency. This limitation is A second refinement to the GAAP percent. Assuming the 10 percent equity
primarily due to policy considerations concept of equity in this rulemaking for requirement for existing businesses
relating to the relative economic impact this credit evaluation criterion is to would apply and this borrower would
of refinancing actions versus new loans include in the equity calculation qualify for a refinancing loan as a result
and how the Agency’s use of its subordinated debt contributed to the of this regulatory change, then the
obligational authority is accounted for borrower by the business owner(s). In income statement shows three years of
as a result of the Federal Credit Reform order for this subordinated debt to count consecutive accrual losses, but
Act of 1990 (Pub. L. 101–508). Further as equity for purposes of the equity breakeven cash flows.
elaboration on this may be found in the criterion, the subordinated note must be In this final rule, the Agency has also
comments section of this preamble expressly subordinate to the Agency’s elected upon consideration to include
wherein the modified tangible balance B&I loan exposure, whether that another refinement of the tangible
sheet equity calculation is discussed at exposure is direct or guaranteed. balance sheet equity computation,
greater length. Moreover, the loan documentation must applicable to all applications, not just
In order to provide for an alternate provide that repayment of this refinancing loans, whereby qualified
equity calculation in determining subordinated debt may not commence intellectual property may count as well.
whether the credit requirement is met until the earlier of the full repayment of Intellectual property falls within the
for refinancing loans, the Agency has the B&I loan exposure or when a period definition of intangible assets, and as
modified existing regulations to define of three consecutive years has passed such, would not ordinarily be included
‘‘tangible balance sheet equity’’ and during which the borrower has met all in a conventional tangible balance sheet
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added two new definitions that build loan covenants and evidenced operating equity computation. But this formula is
directly and indirectly on this term— profit sufficient to commence partial subject to Agency definition in the final
‘‘adjusted tangible net worth’’ and repayment of this subordinated debt analysis, and the Agency has elected to
‘‘allowed tangible asset appreciation.’’ after giving effect to the annual debt recognize that the liquidity arguments
The term ‘‘subordinated owner debt’’ is service requirements of the B&I loan for tangible assets that gave rise to the
also added. These new terms apply only exposure. The partial repayment development of the adjusted equity

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33184 Federal Register / Vol. 71, No. 110 / Thursday, June 8, 2006 / Rules and Regulations

calculation in the first place, may also successfully interconnected with the USDA, can get the equivalent of a
apply to a restricted universe of purchaser of the output. This is not the ‘‘bailout’’ if the more flexible equity test
qualified intellectual property as well. same as being connected to the power is applied. There is also sensitivity
In modern rural businesses, credit grid alone. Being connected to the grid, within USDA as to the proportion of
should be given for these reasonably without enforceable wheeling obligational authority used for
liquid intangible assets in the adjusted agreements and physical refinancing. It is true that if USDA
equity calculation. interconnection with the buyer at the issues a guarantee to Lender A for a
The narrow universe of qualified other end of the transmission route, loan, the proceeds of which pay off a
intellectual property that will count as does not satisfy this requirement. USDA guaranteed loan held by Lender
equity under the adjusted computation Successful interconnection with the B, there is no increase in risk or
consists of trademarks, patents or purchaser of the steam or electricity exposure to the taxpayer. However (and
copyrights that are included on current means that everything is in place that is this may not be fully realized or
(within one year) audited balance required for the purchaser to receive the appreciated by the private sector
sheets, for which an audit opinion has steam or electricity output in community), under federal budget rules,
been received that states the financial accordance with the contractual terms in this circumstance the Agency’s
reports fairly represent the values specified and such delivery by the seller available obligational authority is
therein, and the value of which has been and acceptance by the purchaser has reduced as if a new loan guarantee had
arrived at in accordance with GAAP been demonstrated. been issued to Lender A. A refinancing
standards for valuing intellectual The Agency revised the definition for action is scored against the Agency’s
property. Also, the work papers energy projects to include both ‘power’ budget the same as a new loan action,
supporting this valuation of intellectual and ‘energy.’ The term ‘power plant’ is even though the net incremental risk to
property must be satisfactory to the commonly used to describe a facility the taxpayer differs significantly as
Administrator in order for the asset to that uses fuels to produce electricity or between the two scenarios.
be considered qualified for this purpose. high pressure steam. In these type The Agency must concern itself with
This final rule also increases the plants, power and energy are maximizing the economic benefit that
equity requirement for certain energy intrinsically related. The change in can be achieved in rural America with
projects and provides that financing will definition makes it clear that electric or limited Federal funding and recognize
be guaranteed for energy projects only steam facilities are also considered that net new capital invested in rural
when they have met certain ‘‘energy projects,’’ as are facilities that America has a greater economic impact
performance criteria. Financing for produce fuels such as ethanol or than the incremental cash flow
energy projects will only be allowed biodiesel. The Agency also decided to improvements associated with
when the facility has been constructed narrow the scope of energy projects that refinancing loan guarantees.
according to plans and specifications require increased equity by removing We ultimately believe that a policy of
and is producing at the design levels the production of batteries and fuel cells conforming the modified equity test to
projected in the application for from the definition based on comments recognize off balance sheet values
purposes of underwriting the loan or received. inherent in the appreciation of real
loan guarantee. Based on comments property is rooted in common sense.
received, the Agency slightly lowered II. Comments on the Proposed Rule and However, the expectation is that this
the equity requirements for energy Responses rule could well result in a situation
loans, but continued to require higher The following paragraphs summarize where the Agency is presented with a
equity levels than other industries. The the comments received and the Agency significant increase in the proportion of
higher equity requirements reflect the responses. We received 15 responses of refinancing requests relative to new loan
Agency’s determination that energy which, one is from an elected state requests, with a concomitant reduction
projects are riskier than the average B&I official, six are from borrowers or in the net economic benefit per dollar of
portfolio loan and an intent to apply borrower representatives (a producer budget authority. Therefore, this final
equity criteria that more closely association, business consultants, etc.), rule does not expand the scope of the
conform to conventional lender and eight are from the lender tangible balance sheet equity test
practice. The Agency’s energy borrowers community (two of the lender beyond direct Federal debt and
are typically not utilities in the comments are from the same bank). Federally guaranteed debt. It does not go
conventional sense. As a general rule, as far as many of those providing
conventional utilities have other sources A. Comments on the Modified Tangible comments would have wished, but it
of financing and higher capital Balance Sheet Equity Test reflects a balanced approach to the issue
requirements than can practicably be All comments received regarding the in the current budget environment.
met by Agency programs. modified tangible balance sheet equity As explained in the preamble to the
The final rule requires that energy requirement were positive. Eight of the proposed rule, the Agency considered,
projects must demonstrate two complete comments claimed we did not go far but elected not to propose, revising the
operating cycles at design performance enough; they urged that the new equity tangible balance sheet equity test to
levels projected in the application. A test be applied to new loan guarantee apply across the board, for all
complete operating cycle consists of the requests as well. borrowers, and not restrict its
purchase of raw material inputs, their The most significant change in this availability to refinancing loan
input into the manufacturing process final rule from the proposed rulemaking applications. It may be that the Agency’s
and transformation into a design is the result of additional deliberation experience with the limited
specified number of output units for a within the Agency. The proposed applicability of this rulemaking will
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given level of raw material input within regulatory text applied to the lead to proposing its wider application
a specified period of time and at a refinancing of any loan, whether or not in the future. For now, it was
design-specified quality level. In the it is currently USDA guaranteed. Upon determined to proceed with a more
case of projects that produce steam or further reflection, concern developed limited applicability in order to bring
electricity as an output, there is an with respect to the risk that an existing relief to at least some borrowers in a
additional requirement that they be lender, not presently guaranteed by more rapid period of time. The final rule

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Federal Register / Vol. 71, No. 110 / Thursday, June 8, 2006 / Rules and Regulations 33185

is narrower in scope than was the conforming its equity requirement to List of Subjects
proposed rule. The proposed rule those found in the private sector
7 CFR Part 1980
applied the modified equity calculation inasmuch as the technology is now
to all refinancing loans; the final rule quite established and needs less Loan programs—Business and
limits its application to the refinancing support. Agency-guaranteed loans will industry—Rural development
of debt owed to a Federal agency. still enjoy a better interest rate and the assistance, Rural areas.
The Agency also considered allowing available term may be advantageous 7 CFR Part 4279
full market value refinancing in the when compared to the non-guaranteed
proposed rulemaking. The potential for Loan programs—Business and
private sector alternative. industry—Rural development
abuse of market appraisals for purposes
of full market value refinancing is As for energy projects that are not assistance, Rural areas.
thought to be greater than the potential ethanol or biodiesel, we observe that ■ Accordingly, Chapters XVIII and XLII,
benefit of liberalizing the related equity many renewable energy projects find it title 7, of the Code of Federal
criterion to this maximum degree. In the difficult to impossible to obtain private Regulations are amended as follows:
alternative, the Agency has opted to sector financing even when project
CHAPTER XVIII—RURAL HOUSING
allow consideration of market value equity ratios are high. Thus, while the SERVICE, RURAL BUSINESS-
only with respect to the equity test equity ratios implemented for energy COOPERATIVE SERVICE, RURAL UTILITIES
calculation; the amount of the projects are higher than the SERVICE, AND FARM SERVICE AGENCY,
refinancing loan itself may not exceed requirements for other industries, we DEPARTMENT OF AGRICULTURE
the outstanding balance of the loan to be believe that Agency financing under
refinanced. Market value must be those circumstances nevertheless PART 1980—GENERAL
determined by appraisals using arms- represents a source of capital often ■ 1. The authority citation for part 1980
length methodologies to arrive at an unavailable for these technologies is revised to read as follows:
unbiased ‘‘fair or current market value.’’ elsewhere. The higher equity ratios
Allowing flexibility in the equity Authority: 5 U.S.C. 301 and 7 U.S.C. 1989.
strike a balance between no capital Subpart E also issued under 7 U.S.C.
requirement for refinancing loans where available at all and the risk to the
the market value of real property assets 1932(a).
taxpayer in providing support for
supports such flexibility will serve to Subpart E—Business and Industrial
renewable energy projects. However, in
enhance the financial health of Agency- Loan Program
response to these comments, the Agency
guaranteed borrowers and promote rural
development. modified the equity requirement for
energy projects, but still will require ■ 2. Section 1980.402 is revised to read
B. Comments on the Modified Equity higher equity levels than other as follows:
Requirement for Energy Projects industries. § 1980.402 Definitions.
Seven of the 15 comments addressed Several comments observe that project (a) The following general definitions
the increased equity requirements risks can be mitigated by means other are applicable to the terms used in this
proposed for energy loans—all were than increased equity. The following subpart. Adjusted tangible net worth.
critical, arguing that the equity examples of possible risk mitigation Tangible balance sheet equity plus
requirement should be no different than vehicles were suggested: a strong allowed tangible asset appreciation and
for other types of businesses. One contract for the purchase of the output subordinated owner debt.
argued for preferential treatment for non (off take agreement), the use of Allowed tangible asset appreciation.
profit borrowers. One lender, while established technologies, or The difference between the current net
critical of the differentiated equity performance guarantees combined with book value recorded on the financial
requirement, nevertheless observed that surety bonds to mitigate construction statements (original cost less cumulative
the requirement that energy projects depreciation) of real property assets and
risk. All of these address a particular
demonstrate two complete operating the lesser of their current market value
kind of risk—either the project doesn’t
cycles would ‘‘weed out’’ bad projects. or original cost, where current market
get built, it doesn’t operate as expected
A commodity producer association value is determined using an appraisal
or the market for the output doesn’t
pointed out that many private sector satisfactory to the Agency.
materialize at the price forecast. These
lenders require 50 percent equity, and if Area of high unemployment. An area
the Agency implements the vehicles are all worthwhile
in which a B&I loan guarantee can be
modifications the Business and Industry underwriting tools, but only increased
issued, consisting of a county or group
program will offer very little advantage equity protects against unforeseen risks.
of contiguous counties or equivalent
over private lender options already The lower the debt burden on a project, subdivisions of a State which, on the
available for producer owned the more likely the project will be able basis of the most recent 12-month
businesses. to surmount any of these risks and pay average or the most recent annual
We expect that most of the energy off the debt as and when due. With average data, has a rate of
loan applications will continue to be for respect to off take agreements in unemployment 150 percent or more of
ethanol or similar projects. The particular, if the projected cash flow the national rate. Data used must be
Agency’s experience in lending for stream associated with the off take those published by the Bureau of Labor
ethanol projects from the mid 1970s to agreement is strong, it will cover both Statistics, U.S. Department of Labor.
1990 was not good. This was due to the debt service and an equity return. If the Biogas. Biomass converted to gaseous
combined factors of weak underwriting imputed equity return is sufficient, this fuel.
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criteria, underdeveloped technologies should be attractive to third party Biomass. Any organic material that is
and inexperienced managers. As of investors such that the equity available on a renewable or recurring
1990, credit criteria were tightened up requirement can be met. If the off take basis including agricultural crops, trees
and the technology has developed to the agreement is not sufficient for this, it grown for energy production, wood
point where it is now commercially cannot be said that it is a substitute for waste and wood residues, plants,
proven. The Agency is somewhat increased equity. including aquatic plants and grasses,

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fibers, animal waste and other waste facility; purchase of buildings, Microburst wind. A violently
materials, fats, oils, greases, including machinery, equipment, land easements, descending column of air associated
recycled fats, oils and greases. It does rights of way; payment of startup with a thunderstorm which causes
not include paper that is commonly operating costs, and interest during the straight-line wind damage.
recycled or unsegregated solid waste. period before the first principal Problem loan. A loan which is not
Borrower. A borrower may be a payment becomes due, including performing according to its original
cooperative organization, corporation, interest on interim financing. terms and conditions or which is not
partnership, trust or other legal entity Disaster Assistance for Rural Business expected in the future to perform
organized and operated on a profit or Enterprises. Guaranteed loans according to those terms and conditions.
nonprofit basis; an Indian Tribe on a authorized by section 401 of the Disaster Public body. A municipality, political
Federal or State reservation or other Assistance Act of 1989 (Pub. L. 101–82), subdivision, public authority, district,
Federally recognized tribal group; a providing for the guarantee of loans to or similar organization.
municipality, county or other political assist in alleviating distress caused to Qualified Intellectual Property.
subdivision of a State; or an individual. rural business entities, directly or Trademarks, patents or copyrights
Such borrower must be engaged in or indirectly, by drought, freeze, storm, included on current (within one year)
proposing to engage in improving, excessive moisture, earthquake, or audited balance sheets for which an
developing or financing business, related conditions occurring in 1988 or audit opinion has been received that
industry and employment and 1989, and providing for the guarantee of states the financial reports fairly
improving the economic and loans to such rural business entities that represent the values therein and the
environmental climate in rural areas, refinance or restructure debt as a result reported value has been arrived at in
including pollution abatement and of losses incurred, directly or indirectly, accordance with GAAP standards for
control. because of such natural disasters. See valuing intellectual property. The
Business and Industry Disaster Loans. this subpart and its appendices, supporting work papers must be
Business and Industry loans guaranteed especially Appendix K, containing satisfactory to the Administrator.
under the authority of the Dire additional regulations for these loans. Refinancing loan. A loan, all of the
Emergency Supplemental Drought and Disaster Guaranteed proceeds of which are applied to
Appropriations Act, 1992, Public Law extinguish the entire balance of an
Loans. Guaranteed loans authorized by
102–368. These guaranteed loans cover outstanding debt.
section 331 of the Disaster Assistance
costs arising from the direct Seasoned loan. A loan which:
Act of 1988 (Pub. L. 100–387), providing
consequences of natural disasters such (1) Has a remaining principal
for the guarantee of loans to assist in
as Hurricanes Andrew and Iniki and guaranteed loan balance of two-thirds or
alleviating distress caused to rural
Typhoon Omar that occur after August less of the original aggregate of all
business entities, directly or indirectly,
23, 1992, and receive a Presidential existing B&I guaranteed loans made to
by drought, hail, excessive moisture, or
declaration. Also included are the costs that business.
related conditions occurring in 1988, (2) Is in compliance with all loan
to any producer of crops and livestock
and providing for the guarantee of loans conditions and B&I regulations.
that are a direct consequence of at least
a 40 percent loss to a crop, 25 percent to such rural business entities that (3) Has been current on the B&I
loss to livestock, or damage to building refinance or restructure debt as a result guaranteed loan(s) payments for 24
structures from a microburst wind of losses incurred, directly or indirectly, consecutive months.
occurrence in calendar year 1992. because of such natural disasters. (4) Is secured by collateral which is
Commercially available. Energy Energy projects. Commercially determined to be adequate to ensure
projects utilizing technology that has a available projects that produce or there will be no loss on the B&I
proven operating history, and for which distribute energy or power and/or guaranteed loan.
there is an established industry for the projects that produce biomass or biogas State. Any of the 50 States, the
design, installation, and service fuel. Commonwealth of Puerto Rico, the
(including spare parts) of the Farmers Home Administration Virgin Islands of the United States,
equipment. (FmHA). The former agency of USDA Guam, American Samoa, the
Community facilities. For the that previously administered the Commonwealth of the Northern Mariana
purposes of this subpart, community programs of this Agency. Many Islands, the Republic of Palau, the
facilities are those facilities designed to Instructions and forms of FmHA are still Federated States of Micronesia, and the
aid in the development of private applicable to Agency programs. Republic of the Marshall Islands.
business and industry in rural areas. Hurricane Andrew. A hurricane that Subordinated owner debt. Debt owed
Such facilities include, but are not caused damage in southern Florida on by the borrower to one or more of the
limited to, acquisition and site August 24, 1992, and in Louisiana on owner(s) that is subordinated to debt
preparation of land for industrial sites August 26, 1992. owed by the borrower to the Agency or
(but not for improvements erected Hurricane Iniki. A hurricane that guaranteed by the Agency (aggregate B&I
thereon), access streets and roads caused damage in Hawaii on September loan exposure) pursuant to a
serving the site, parking areas extension 11, 1992. subordination agreement satisfactory to
or improvement of community Letter of conditions. Letter issued by the Agency. The debt must have been
transportation systems serving the site Rural Development under Public Law issued in exchange for cash loaned to
and utility extensions all incidental to 103–354 to a borrower setting forth the the borrower for the benefit of the
site preparation. Projects eligible for conditions under which Rural borrower’s business. The terms of the
assistance under Subpart A of Part 1942 Development will make a direct subordination agreement must provide
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of this chapter are not eligible for (insured) loan from the Rural that repayment will not commence until
assistance under this subpart. Development Insurance Fund. the earlier of the date all aggregate B&I
Development cost. These costs Loan classification system. The loan exposure has been repaid or when
include, but are not limited to, those for process by which loans are examined a period of three consecutive years has
acquisition, planning, construction, and categorized by degree of potential passed during which the borrower has
repair or enlargement of the proposed for loss in the event of default. met all loan covenants and evidenced

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operating profit sufficient to commence Financing for energy projects will only determination that special
partial repayment of this subordinated be allowed when the facility has been circumstances necessitate this course of
debt after giving effect to the annual constructed according to plans and action.
debt service requirements of the specifications and is producing at the (b) The equity requirement must be
aggregate B&I loan exposure. The partial quality and quantity projected in the met in the form of either cash or
repayment schedule in the case of the application. tangible earning assets contributed to
latter scenario is subject to annual * * * * * the business and reflected on the
Agency concurrence and may not be balance sheet.
■ 4. Section 1980.441 is revised to read
more accelerated than the rate of the (c) The equity requirement must be
as follows: determined using balance sheets
debt repayment schedule in effect for
the Agency’s aggregate B&I loan § 1980.441 Borrower equity requirements. prepared in accordance with GAAP and
exposure. met upon giving effect to the entirety of
(a) A minimum of 10 percent tangible
Tangible balance sheet equity. Total the loan in the calculation, whether or
balance sheet equity will be required for
equity less the value of intangible assets not the loan itself is fully advanced, as
existing businesses at loan closing. A
recorded on the financial statements, as of the date the loan is closed; a
minimum of 20 percent tangible balance
determined from balance sheets certification to this effect is required of
sheet equity will be required for new
prepared in accordance with generally all guaranteed lenders.
businesses at loan closing. For energy (d) The modified formula for
accepted accounting principles (GAAP), projects, the minimum tangible balance
plus qualified intellectual property. determining whether the equity
sheet equity requirement range will be requirement is met, ‘‘adjusted tangible
Typhoon Omar. A typhoon that between 25 percent and 40 percent.
caused damage in Guam on August 28, net worth,’’ may be used only in cases
Criteria for considering the minimum where the guarantee requested is for a
1992. equity required for an individual
Working capital. The excess of current loan, the proceeds of which are to be
application will be based on: existing used entirely to refinance a debt owed
assets over current liabilities. It businesses with successful financial and to the Federal government or Federally
identifies the relatively liquid portion of management history vs. start-up guaranteed debt. In all other situations,
total enterprise capital which businesses; personal/corporate the equity requirement must be
constitutes a margin or buffer for guarantees offered; contractual determined using tangible net worth.
meeting obligations within the ordinary relationships with suppliers and buyers;
operating cycle of the business. credit rating; and strength of the CHAPTER XLII—RURAL BUSINESS-
(b) Accounting terms not otherwise COOPERATIVE SERVICE AND RURAL
business plan/feasibility study. Where
defined in this part shall have the UTILITIES SERVICE, DEPARTMENT OF
the application is a request to refinance AGRICULTURE
definition ascribed to them under outstanding Federal direct or guaranteed
generally accepted accounting loans, without any new financing, the PART 4279—GUARANTEED
principles (GAAP). equity requirement may be determined LOANMAKING
■ 3. Section 1980.411 is amended by using adjusted tangible net worth. An
adding new paragraphs (a)(11)(iv) and application that combines a refinancing ■ 5. The authority citation for part 4279
(a)(11)(v) and by adding a new loan or guarantee request with a new is revised to read as follows:
paragraph (a)(16) to read as follows: loan or guarantee request is subject to Authority: 5 U.S.C. 301, 7 U.S.C. 1989 and
the standard, unadjusted, equity 7 U.S.C. 1932(a).
§ 1980.411 Loan purposes. requirement except as provided in
* * * * * paragraphs (a)(1) or (a)(2) of this section. Subpart A—General
(a) * * * Increases or decreases in the equity
(11) * * * ■ 6. Section 4279.2 is revised to read as
requirements may be imposed or
(iv) It does not refinance subordinated follows:
granted as follows:
owner debt; or (1) A reduction in the equity § 4279.2 Definitions and abbreviations.
(v) (Except where the amount to be requirement for existing businesses may (a) Definitions.
refinanced is owed directly to the be permitted by the Administrator. In Adjusted tangible net worth. Tangible
Federal government or is Federally order for a reduction to be considered, balance sheet equity plus allowed
guaranteed) the amount to be refinanced the borrower must furnish the tangible asset appreciation and
by the Agency is a secondary part (less following: subordinated owner debt.
than 50 percent) of the overall loan (i) Collateralized personal and Agency. The Rural Business-
requested. corporate guarantees, including any Cooperative Service or successor
* * * * * parent, subsidiary, or affiliated Agency assigned by the Secretary of
(16) Energy projects. Commercially company, when feasible and legally Agriculture to administer the B&I
available energy projects that produce permissible, and program. References to the National
biomass fuel or biogas as an output must (ii) Pro forma and historical financial Office, Finance Office, State Office or
have completed two operating cycles at statements that indicate the business to other Agency offices or officials should
design performance levels submitted to be financed meets or exceeds the be read as prefaced by ‘‘Agency’’ or
the Agency. Projects that produce steam median quartile (as identified in the ‘‘Rural Development’’ as applicable.
or electricity as an output must have Risk Management Association’s Annual Allowed tangible asset appreciation.
met or exceeded acceptance test Statement Studies or similar The difference between the current net
performance criteria submitted to the publication) for the current ratio, quick book value recorded on the financial
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Agency and be successfully ratio, debt-to-worth ratio, debt coverage statements (original cost less cumulative
interconnected with the purchaser of ratio, and working capital. depreciation) of real property assets and
the output. Performance or acceptance (2) The approval official may require the lesser of their current market value
test requirements for all other energy more than the minimum equity or original cost, where current market
projects will be determined by the requirements provided in this paragraph value is determined using an appraisal
Agency on a case by case basis. if the official makes a written satisfactory to the Agency.

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Arm’s-length transaction. The sale, Fair market value. The price that product that is processed to add value
release, or disposition of assets in which could reasonably be expected for an to the product. For example, straw is
the title to the property passes to a asset in an arm’s-length transaction processed into particle board.
ready, willing, and able disinterested between a willing buyer and a willing Negligent servicing. The failure to
third party that is not affiliated with or seller under ordinary economic and perform those services which a
related to and has no security, monetary business conditions. reasonably prudent lender would
or stockholder interest in the borrower Farmer’s Home Administration perform in servicing (including
or transferor at the time of the (FmHA). The former agency of USDA liquidation of) its own portfolio of loans
transaction. that previously administered the that are not guaranteed. The term
Assignment Guarantee Agreement programs of this Agency. Many includes not only the concept of a
(Business and Industry). Form RD 4279– Instructions and forms of FmHA are still failure to act, but also not acting in a
6, the signed agreement among the applicable to Agency programs. timely manner, or acting in a manner
Agency, the lender, and the holder Finance Office. The office which contrary to the manner in which a
containing the terms and conditions of maintains the Agency financial reasonably prudent lender would act.
an assignment of a guaranteed portion of accounting records located in St. Louis, Parity. A lien position whereby two or
a loan, using the single note system. Missouri. more lenders share a security interest of
Biogas. Biomass converted to gaseous High-impact business. A business that equal priority in collateral. In the event
fuel. offers specialized products and services of default, each lender will be affected
Biomass. Any organic material that is that permit high prices for the products on a pro rata basis.
available on a renewable or recurring produced, may have a strong presence Participation. Sale of an interest in a
basis including agricultural crops, trees in international market sales, may loan by the lender wherein the lender
grown for energy production, wood provide a market for existing local retains the note, collateral securing the
waste and wood residues, plants, business products and services, and note, and all responsibility for loan
including aquatic plants and grasses, which is locally owned and managed. servicing and liquidation.
Holder. A person or entity, other than Poor. A community or area is
fibers, animal waste and other waste
the lender, who owns all or part of the considered poor if, based on the most
materials, fats, oils, greases, including
guaranteed portion of the loan with no recent decennial census data, either the
recycled fats, oils and greases. It does
servicing responsibilities. When the county, city, or census tract where the
not include paper that is commonly
single note option is used and the community or area is located has a
recycled or unsegregated solid waste.
lender assigns a part of the guaranteed median household income at or below
Borrower. All parties liable for the
note to an assignee, the assignee the poverty line for a family of four; has
loan except for guarantors.
becomes a holder only when the Agency a median household income below the
Commercially available. Energy
receives notice and the transaction is nonmetropolitan median household
projects utilizing technology that has a
completed through the use of Form RD income for the State; or has a population
proven operating history, and for which
4279–6 or predecessor form. of which 25 percent or more have
there is an established industry for the
Interim financing. A temporary or income at or below the poverty line.
design, installation, and service Promissory Note. Evidence of debt.
short-term loan made with the clear
(including spare parts) of the ‘‘Note’’ or ‘‘Promissory Note’’ shall also
intent that it will be repaid through
equipment. be construed to include ‘‘Bond’’ or other
another loan. Interim financing is
Conditional Commitment (Business evidence of debt where appropriate.
frequently used to pay construction and
and Industry). Form RD 4279–3, the Qualified Intellectual Property.
other costs associated with a planned
Agency’s notice to the lender that the Trademarks, patents or copyrights
project, with permanent financing to be
loan guarantee it has requested is included on current (within one year)
obtained after project completion.
approved subject to the completion of Lender. The organization making, audited balance sheets for which an
all conditions and requirements set servicing, and collecting the loan which audit opinion has been received that
forth by the Agency. is guaranteed under the provision of the states the financial reports fairly
Deficiency balance. The balance appropriate subpart. represent the values therein and the
remaining on a loan after all collateral Lender’s Agreement (Business and reported value has been arrived at in
has been liquidated. Industry). Form RD 4279–4 or accordance with GAAP standards for
Deficiency judgment. A monetary predecessor form between the Agency valuing intellectual property. The
judgment rendered by a court of and the lender setting forth the lender’s supporting work papers must be
competent jurisdiction after foreclosure loan responsibilities when the Loan satisfactory to the Administrator.
and liquidation of all collateral securing Note Guarantee is issued. Refinancing loan. A loan, all of the
the loan. Loan Agreement. The agreement proceeds of which are applied to
Energy projects. Commercially between the borrower and lender extinguish the entire balance of an
available projects that produce or containing the terms and conditions of outstanding debt.
distribute energy or power and/or the loan and the responsibilities of the Rural Development. The Under
produce biomass or biogas fuel. borrower and lender. Secretary for Rural Development has
Commercially available energy projects Loan Note Guarantee (Business and policy and operational oversight
that utilize technology that has a proven Industry). Form RD 4279–5 or responsibilities for RHS, RBS and RUS.
operating history, and for which there is predecessor form, issued and executed Spreadsheet. A table containing data
an established industry for the design, by the Agency containing the terms and from a series of financial statements of
installation, and service (including conditions of the guarantee. a business over a period of time.
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spare parts) of the equipment. Loan-to-value. The ratio of the dollar Financial statement analysis normally
Existing lender debt. A debt not amount of a loan to the dollar value of contains spreadsheets for balance sheet
guaranteed by the Agency, but owed by the collateral pledged as security for the items and income statements and may
a borrower to the same lender that is loan. include funds flow statement data and
applying for or has received the Agency Natural resource value-added commonly used ratios. The spreadsheets
guarantee. product. Any naturally occurring enable a reviewer to easily scan the

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data, spot trends, and make FMI—Forms Manual Insert § 4279.131 Credit quality.
comparisons. NAD—National Appeals Division * * * * *
State. Any of the 50 States, the OGC—Office of the General Counsel (d) Equity. (1) A minimum of 10
Commonwealth of Puerto Rico, the RBS—Rural Business-Cooperative percent tangible balance sheet equity
Virgin Islands of the United States, Service will be required for existing businesses
Guam, American Samoa, the RHS—Rural Housing Service at loan closing. A minimum of 20
Commonwealth of the Northern Mariana RUS—Rural Utilities Service percent tangible balance sheet equity
Islands, the Republic of Palau, the SBA—Small Business Administration will be required for new businesses at
USDA—United States Department of loan closing. For energy projects, the
Federated States of Micronesia, and the
Agriculture minimum tangible balance sheet equity
Republic of the Marshall Islands.
Subordinated owner debt. Debt owed (c) Accounting terms not otherwise requirement range will be between 25
by the borrower to one or more of the defined in this part shall have the percent and 40 percent. Criteria for
owner(s) that is subordinated to debt definition ascribed to them under considering the minimum equity
owed by the borrower to the Agency or GAAP. required for an individual application
guaranteed by the Agency (aggregate B&I will be based on: existing businesses
Subpart B—Business and Industry with successful financial and
loan exposure) pursuant to a Loans
subordination agreement satisfactory to management history vs. start-up
the Agency. The debt must have been ■ 7. Section 4279.113 is amended by businesses; personal/corporate
issued in exchange for cash loaned to revising paragraph (r) and by adding a guarantees offered; contractual
the borrower for the benefit of the paragraph (cc) to read as follows: relationships with suppliers and buyers;
borrower’s business. The terms of the credit rating; and strength of the
subordination agreement must provide § 4279.113 Eligible loan purposes. business plan/feasibility study. Where
that repayment will not commence until * * * * * the application is a request to refinance
the earlier of the date all aggregate B&I (r) To refinance outstanding debt outstanding Federal direct or guaranteed
loan exposure has been repaid or when when it is determined that the project is loans, without any new financing, the
a period of three consecutive years has viable and refinancing is necessary to equity requirement may be determined
passed during which the borrower has improve cash flow and create new or using adjusted tangible net worth. An
met all loan covenants and evidenced save existing jobs. Except as provided application that combines a refinancing
operating profit sufficient to commence for in § 4279.108(d)(4) of this subpart, guarantee request with a new loan
partial repayment of this subordinated existing lender debt may be included guarantee request is subject to the
debt after giving effect to the annual provided that, at the time of the standard, unadjusted, equity
debt service requirements of the application, the loan has been current requirement except as provided in
aggregate B&I loan exposure. The partial for at least the past 12 months (unless paragraphs (d)(1)(i) or (d)(1)(ii) of this
repayment schedule in the case of the such status is achieved by the lender section. Increases or decreases in the
latter scenario is subject to annual forgiving the borrower’s debt) and the equity requirements may be imposed or
Agency concurrence and may not be lender is providing better rates or terms. granted as follows:
more accelerated than the rate of the Subordinated owner debt is not eligible (i) A reduction in the equity
debt repayment schedule in effect for under this paragraph. Unless the requirement for existing businesses may
the Agency’s aggregate B&I loan amount to be refinanced is owed be permitted by the Administrator. In
exposure. directly to the Federal government or is order for a reduction to be considered,
Subordination. An agreement Federally guaranteed, the refinancing the borrower must furnish the
must be a secondary part (less than 50 following:
between the lender and borrower
(A) Collateralized personal and
whereby lien priorities on certain assets percent) of the overall loan.
corporate guarantees, including any
pledged to secure payment of the * * * * * parent, subsidiary, or affiliated
guaranteed loan will be reduced to a (cc) To finance energy projects. company, when feasible and legally
position junior to, or on parity with, the Commercially available energy projects permissible (in accordance with
lien position of another loan in order for that produce biomass fuel or biogas as § 4279.149 of this subpart), and
the Agency borrower to obtain an output must have completed two (B) Pro forma and historical financial
additional financing, not guaranteed by operating cycles at design performance statements that indicate the business to
the Agency, from the lender or a third levels submitted to the Agency. Projects be financed meets or exceeds the
party. that produce steam or electricity as an median quartile (as identified in the
Tangible balance sheet equity. Total output must have met or exceeded Risk Management Association’s Annual
equity less the value of intangible assets acceptance test performance criteria Statement Studies or similar
recorded on the financial statements, as submitted to the Agency and be publication) for the current ratio, quick
determined from balance sheets successfully interconnected with the ratio, debt-to-worth ratio, debt coverage
prepared in accordance with generally purchaser of the output. Performance or ratio, and working capital.
accepted accounting principles (GAAP), acceptance test requirements for all (ii) The approval official may require
plus qualified intellectual property. other energy projects will be determined more than the minimum equity
Veteran. For the purposes of assigning by the Agency on a case by case basis. requirements provided in this paragraph
priority points, a veteran is a person Financing for energy projects will only if the official makes a written
who is a veteran of any war, as defined be allowed when the facility has been determination that special
in section 101(12) of title 38, United constructed according to plans and circumstances necessitate this course of
cprice-sewell on PROD1PC66 with RULES

States Code. specifications and is producing at the action.


(b) Abbreviations. quality and quantity projected in the (2) The equity requirement must be
B&I—Business and Industry application. met in the form of either cash or
CF—Community Facilities ■ 8. Section 4279.131 is amended by tangible earning assets contributed to
CLP—Certified Lenders Program revising paragraph (d) to read as the business and reflected on the
FSA—Farm Service Agency follows: balance sheet.

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33190 Federal Register / Vol. 71, No. 110 / Thursday, June 8, 2006 / Rules and Regulations

(3) The lender must certify that the certificates, registrations, and approvals Washington, DC 20463, (202) 694–1650
equity requirement was determined who either filed for termination of their or (800) 424–9530.
using balance sheets prepared in licenses or approvals or filed for SUPPLEMENTARY INFORMATION:
accordance with GAAP and met upon possession only/storage licenses before
giving effect to the entirety of the loan October 1, 2005, and permanently Scope of Regulatory Changes
in the calculation, whether or not the ceased licensed activities entirely by The Commission is revising its
loan itself is fully advanced, as of the September 30, 2005.’’ regulations regarding communications
date the guaranteed loan is closed. that are coordinated with Federal
§ 171.19 [Corrected] candidates and political party
* * * * *
■ 4. On page 30756, in the first complete committees. The Commission is: (1)
Dated: May 30, 2006. Revising the fourth content standard at
paragraph, the third sentence is
Thomas C. Dorr, corrected to read, ‘‘The materials 11 CFR 109.21(c)(4) to establish separate
Under Secretary, Rural Development. licensees that are billed on the time frames for communications
[FR Doc. E6–8891 Filed 6–7–06; 8:45 am] anniversary date of the license are those referring to political parties,
BILLING CODE 3410–XY–P covered by fee categories 1C, 1D, Congressional and Presidential
2(A)(2), 2(A)(3), 2(A)(4), 2B, 2C, 3A candidates; (2) creating a safe harbor for
through 3P, and 4B through 9D.’’ certain endorsements and solicitations
NUCLEAR REGULATORY Dated at Rockville, Maryland, this 2nd day
by Federal candidates; (3) revising the
COMMISSION of June, 2006. temporal limit of the common vendor
For the Nuclear Regulatory Commission.
and former employee conduct
10 CFR Parts 170 and 171 standards; (4) creating a safe harbor for
Peter J. Rabideau,
the use of publicly available
RIN: 3150–AH83 Acting Chief Financial Officer. information; (5) creating a safe harbor
[FR Doc. E6–8923 Filed 6–7–06; 8:45 am] for the establishment and use of a
Revision of Fee Schedules; Fee
Recovery for FY 2006; Correction
BILLING CODE 7590–01–P firewall; (6) clarifying that the payment
prong of the coordinated
AGENCY: Nuclear Regulatory communication test is satisfied if an
Commission. FEDERAL ELECTION COMMISSION outside person pays for only part of the
ACTION: Final rule; correction. costs of a communication; and (7)
11 CFR Part 109 revising 11 CFR 109.37 to include the
SUMMARY: This document corrects a [Notice 2006–10] applicable time frame and safe harbor
final rule appearing in the Federal revisions in 11 CFR 109.21.
Register on May 30, 2006 (71 FR 30722) Coordinated Communications
concerning the licensing, inspection, Transmission of Final Rules to
and annual fees charged to NRC AGENCY: Federal Election Commission. Congress
applicants and licensees in compliance ACTION: Final rules and transmittal of Under the Administrative Procedure
with the Omnibus Budget rules to Congress. Act, 5 U.S.C. 553(d), and the
Reconciliation Act of 1990, as amended. Congressional Review of Agency
SUMMARY: The Federal Election
This action is necessary to correct Rulemaking Act, 5 U.S.C. 801(a)(1),
Commission is revising its regulations agencies must submit final rules to the
typographical and printing errors.
regarding communications that are Speaker of the House of Representatives
DATES: Effective Date: July 31, 2006. coordinated with Federal candidates
FOR FURTHER INFORMATION CONTACT:
and the President of the Senate and
and political party committees. The publish them in the Federal Register at
Tammy Croote, telephone 301–415– Commission’s rules set out a three-
6041; Office of the Chief Financial least 30 calendar days before they take
prong test for determining whether a effect. The final rules that follow were
Officer, U.S. Nuclear Regulatory communication is ‘‘coordinated’’ with,
Commission, Washington, DC 20555– transmitted to Congress on June 2, 2006.
and therefore an in-kind contribution to,
0001. a Federal candidate or a political party Explanation and Justification
SUPPLEMENTARY INFORMATION: committee. These final rules implement I. Background
■ 1. On page 30735, in the third column, the recent decision of the Court of
Appeals in Shays v. Federal Election A. Bipartisan Campaign Reform Act and
in the last line of the continued 2002 Coordination Rulemaking
paragraph, the reference to ‘‘Section Commission, in which the court
III.B.3.a–’’ is corrected to read ‘‘Section determined that the Commission needs The Bipartisan Campaign Reform Act
III.B.3.a–h’’. to provide a more complete explanation of 2002,1 (‘‘BCRA’’), repealed the
■ 2. On page 30741, under Table XIV.— and justification for its rules pursuant to Commission’s pre-BCRA regulations
ANNUAL FEE SUMMARY the Administrative Procedure Act. To regarding ‘‘coordinated general public
CALCULATIONS FOR THE SPENT comply with the court’s decision, and to political communications’’ and directed
FUEL STORAGE/REACTOR address other issues involving the the Commission to promulgate new
DECOMMISSIONING FEE CLASS, in coordinated communication rules, the regulations on ‘‘coordinated
the first column, in the fourth line, the Commission is issuing these Final Rules communications’’ in their place.2
phrase ‘‘60 prorated annual fee’’ is and Explanation and Justification. Congress specified in BCRA that the
corrected to read ‘‘60 percent prorated Further information is provided in the Commission’s new regulations ‘‘shall
annual fee’’. supplementary information that follows. not require agreement or formal
cprice-sewell on PROD1PC66 with RULES

DATES: Effective July 10, 2006. collaboration to establish coordination.’’


§ 171.16 [Corrected] FOR FURTHER INFORMATION CONTACT: Mr.
1 Pub. L. 107–155, 116 Stat. 81 (2002); amending
■ 3. On page 30755, the second sentence Brad C. Deutsch, Assistant General
the Federal Election Campaign Act of 1971, as
of footnote 1 is corrected to read, Counsel, Mr. Ron B. Katwan, Ms. amended, 2 U.S.C. 431 et seq. (the ‘‘Act’’ or
‘‘However, the annual fee is waived for Margaret G. Perl, or Ms. Esa L. Sferra, ‘‘FECA’’).
those materials licenses and holders of Attorneys, 999 E Street, NW., 2 Pub. L. 107–155, sec. 214(b), (c) (2002).

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