§ 1710.53 - Refinancing.

§ 1710.53 Refinancing.

(a) General.

(1) Subject to the availability of funds for such purpose, RUS may use loan funds to refinance prior loans made or guaranteed under the RE Act, as amended, (7 U.S.C. 902(a)). Such refinancing must be in the interest of rural consumers, taxpayers, rural economic development or otherwise in the public interest, as determined by the Administrator.

(2) The Secretary's authority to make loans for refinancing under this section is in addition to any other authority granted to the Secretary to make or modify loans under the RE Act or any other statutory authority.

(3) Nothing in this section changes the policies or standards set forth in 7 CFR part 1717, subpart Y, or the terms and conditions of the agreements entered into between RUS and FFB or the notes issued to RUS or FFB in connection with RUS or FFB loans.

(4) When funds are made available under this section, RUS will issue a public notice in the Federal Register specifying the amount of funds available under this section. The notice will contain additional application procedures specific to the amount and type of funding available and new loan application periods related to the availability of funds. The notice may also include Administration priorities, such as directing benefits to disadvantaged communities and reducing greenhouse gas emissions. The Administrator, in setting funding priorities and application periods, may consider the amount of available funds, RUS resources, RUS priorities and policy goals, and any other factors related to the efficient operation of the agency.

(b) Definitions. For the purpose of this section, the following terms have the following meanings. Terms not defined here are defined in § 1710.2. When the definitions provided in this section conflict with any other definition applicable to RUS Electric Program regulations in this chapter, including § 1710.2, the definition of this section will control only as it relates to refinancing under this section.

Advance means advance or advances of loan funds made by RUS to the borrower pursuant to the terms and conditions in the loan documents.

Agency means the Rural Utilities Service or its successor.

Conditional commitment letter means the notification issued by the Administrator to an eligible entity advising it of the estimated terms, conditions, and amount of the new loan.

Eligible entity means an RUS Electric Program borrower with an unpaid and outstanding FFB loan or RUS loan.

FFB means the Federal Financing Bank.

FFB loan means a loan made by FFB and guaranteed by RUS pursuant to the RE Act for electric purposes.

RUS loan means a loan made by the RUS under the RE Act for electric purposes.

(c) Loan purpose. Proceeds of loans made under this section may be used to:

(1) Prepay all outstanding amounts owed on an FFB or RUS loan or one or more advances made under such loan; and

(2) Pay any applicable prepayment premium, fee, or expense related to the eligible RUS or FFB loan being refinanced.

(d) Eligibility requirements -

(1) Eligible entity. Loans under this section may only be made to an eligible entity for the purposes indicated in paragraph (c) of this section.

(2) Eligible loans for refinancing. Only FFB loans and RUS loans as defined in this section are eligible for refinancing under this section.

(e) Allocation of funds under this section. Unless prohibited by congressional appropriation or statute, in allocating the funds available to RUS under its lending authority, the Administrator may determine, on a programmatic or case by case basis, that other RE Act loan purposes take priority over refinancing. The Administrator may, but is not limited to, consider the following factors in making this determination:

(1) The overall availability of funding compared to anticipated loan demand;

(2) The best interests of rural consumers;

(3) The protection of the Government's financial interest in existing loans and collateral; and

(4) Broader policy objectives, including directing benefits to disadvantaged communities, reducing greenhouse gas emissions, and other priorities of the Secretary of Agriculture.

(f) Application process.

(1) When funds are available, the RUS will publish a notice identifying the amount and type of funds available for refinancing for the funding period in total and per applicant. The notice will identify the priorities established by the Agency for the use of the available funds. Borrowers seeking to refinance RUS loans or FFB loans will be required to submit, at a minimum, the following information:

(i) Borrower reference number;

(ii) Note designation;

(iii) Rural Electric Telephone (RET) Advance loan account number;

(iv) FFB complete identifier for an FFB loan;

(v) Date(s) of advance;

(vi) Interest rate;

(vii) Principal outstanding;

(viii) Current final maturity date;

(ix) Short narrative explaining how the proposed refinancing would be in the interest of rural consumers, taxpayers, rural economic development or otherwise in the public interest; and

(x) The requested final maturity date for the new loan. The requested final maturity date must be for a period not to exceed the maximum maturity date allowed by statute, regulation, or applicable notice. An eligible entity must submit a certification that the remaining useful life of its electric system is equal to or exceeds the new requested final maturity date and, that the requested final maturity date does not exceed the term of its wholesale power contract with its members or with its generation and transmission supplier (where applicable).

(2) The Agency reserves the right to offer a loan under this section with a maturity date that varies from the requested date. Unless the Administrator makes a specific determination to the contrary, the Electric Program will not approve a new loan that includes a final maturity date that exceeds the remaining useful life of its electric system or any applicable wholesale power contract term.

(3) On a case-by-case basis, as necessary, the Administrator may approve a new loan that includes a final maturity that exceeds the remaining useful life of the applicant's electric system or applicable wholesale power contract term provided the Administrator finds that the requirements contained in § 1710.151 are satisfied, the new loan is feasible under § 1710.151(b), and such action addresses critical environmental or consumer needs.

(g) Loan requirements.

(1) All refinancing loans made under this section must be in the interest of rural consumers, taxpayers, rural economic development, or otherwise in the public interest.

(2) All refinancing loans made under this section must be feasible as determined by RUS based on the financial condition of the borrower and the borrower's ability to repay and all loans must be adequately secured, as determined by RUS.

(3) Borrowers will be required to execute new legal documents, including a new note, loan contract, and security documents as necessary.

(4) Refinancing loans made under this section will generally be considered categorical exclusions for the purpose of environmental reviews because environmental reviews have previously been completed for the FFB loans or RUS loans being refinanced.

(h) New loan terms.

(1) Interest on advances made on loans made under this section will be at the interest rate available on the date of the advance for the new loan used to refinance the prior outstanding loan and any related premium, fee, or expense.

(2) An eligible entity must propose a maturity date for the new loan not to exceed the maturity prescribed by this section, a funding notice, or thirty-five (35) years, whichever is shortest.

(3) An eligible entity may be given the option of applying the proceeds of an advance made on the new loan to cover any applicable prepayment premium, fee, or other expense.

(4) If the prepayment premiums are to be financed by the new loan, the maximum principal amount of the note will be increased in an amount sufficient to cover such prepayment premiums in full.

(5) Provided such waiver is not inconsistent with applicable law or the terms and conditions of the notes previously issued to RUS or FFB, the Administrator may, on a case-by-case basis, waive or modify the requirements set forth in this paragraph (h), if in the Administrator's judgment, it is necessary to implement the intent of the authorizing statute and is in the best financial interest of the Government.

[87 FR 74497, Dec. 6, 2022]