§ 1717.857 Refinancing of existing secured debt—distribution and power supply borrowers. ( a ) *Advance approval.* All applications for a lien accommodation or subordination for the refinancing of existing secured debt that meet the qualification criteria of this paragraph, except applications from borrowers in default under their mortgage or loan contract with RUS, are eligible for advance approval. Such lien accommodations and subordinations are deemed to be in the Government's interest, and RUS will approve them once RUS is satisfied that the requirements of this paragraph and paragraph (c) of this section have been met. The qualification criteria are as follows: ( 1 ) The refinancing is a current refunding and does not involve interest rate swaps, forward delivery contracts, or similar features;
( 2 ) The principal amount of the refinancing loan does not exceed the sum of the outstanding principal amount of the debt being refinanced plus the amount of transactions costs included in the refinancing loan that are eligible for lien accommodation or subordination under § 1717.852(a)(4);
( 3 ) The weighted average life of the refinancing loan is not greater than the weighted average remaining life of the loan being refinanced; and
( 4 ) The present value of the cost of the refinancing loan, including all transaction costs and any required investments in the lender, is less than the present value of the cost of the loan being refinanced, as determined by a method acceptable to RUS. The discount rate used in the present value analysis shall be equal to either: ( i ) The current rate on Treasury securities having a maturity equal to the weighted average life of the refunding loan, plus one-eighth percent, or
( ii ) A rate approved by RUS based on documentation provided by the borrower as to its marginal long-term borrowing cost.
( b ) *Other applications.* Applications for a lien accommodation or subordination for refinancing that do not meet the requirements of paragraph (a) of this section will be reviewed by RUS under normal review procedures for these applications. In the case of either advance approval or normal review, a lien subordination would be authorized only if the lien of the mortgage was subordinated with respect to the assets securing the loan being refinanced.
( c ) *Application contents—advance approval of refinancing.* Applications for a lien accommodation or subordination for refinancing of existing secured debt that meet the qualification criteria for advance approval set forth in paragraph (a) of this section, must include the following information and documents: ( 1 ) A certification by an authorized official of the borrower that the application meets the requirements of paragraph (a) of this section and all applicable provisions of §§ 1717.852 and 1717.853;
( 2 ) Documentation and analysis demonstrating that the application meets the qualification criteria set forth in paragraph (a) of this section;
( 3 ) A statement from the borrower requesting the lien accommodation or subordination and including the amount and maturity of the proposed loan, a general description of the debt to be refinanced, the name and address of the lender, and an attached term sheet summarizing the terms and conditions of the proposed loan;
( 4 ) The borrower's financial and statistical report, the data in which shall not be more than 60 days old when the complete application is received by RUS;
( 5 ) Draft copy of any new mortgage or mortgage amendment (supplement) required by RUS or the lender, unless RUS has notified the borrower that it wishes to prepare these documents itself;
( 6 ) A copy of the loan agreement, loan note, bond or other financing instrument, unless RUS has notified the borrower that these documents need not be submitted;
( 7 ) Form AD-1047, Certification Regarding Debarment, Suspension, and Other Responsibility Matters—Primary Covered Transactions, as required by 2 CFR part 417:
( 8 ) A report by the borrower stating whether or not it is delinquent on any Federal debt, and if delinquent, the amount and age of the delinquency and the reasons therefor; and a certification, if not previously provided, that the borrower has been informed of the Government's collection options; and
( 9 ) Other information, documents and opinions that RUS may require to determine whether all of the applicable provisions of this subpart have been met.
( d ) *Application contents—normal review of refinancing.* Applications for a lien accommodation or subordination for refinancing of existing secured debt that do not meet the requirements for advance approval set forth in paragraph (a) of this section, must include the following information and documents: ( 1 ) The information and documents set forth in paragraphs (c)(3) through (9) of this section;
( 2 ) A complete description of the refinancing loan and the outstanding debt to be refinanced;
( 3 ) An analysis comparing the refinancing loan with the loan being refinanced as to the weighted average life and the net present value of the costs of the two loans; and
( 4 ) If the present value of the cost of the refinancing loan is greater than the present value of the cost of the debt being refinanced, financial forecasts for at least 5 years comparing the borrower's debt service and other costs, revenues, margins, cash flows, TIER, and DSC, with and without the proposed refinancing.
( e ) *Application process and timeframes.* The application process and timeframes for RUS review and action for refinancings are set forth in § 1717.859(d).
( f ) *Prepayments of concurrent RUS insured loans.* If the loan being refinanced was made concurrently as supplemental financing required by RUS in connection with an RUS insured loan, the refinancing will not be considered a prepayment under the RUS mortgage, and no proportional prepayment of the concurrent RUS insured loan will be required, provided that the principal amount of the refinancing loan is not less than the amount of loan principal being refinanced, and the weighted average life of the refinancing loan is materially equal to the weighted average remaining life of the loan being refinanced. The refinancing loan shall be considered a concurrent loan.
[58 FR 53843, Oct. 19, 1993, as amended at 60 FR 67410, Dec. 29, 1995; 79 FR 76003, Dec. 19, 2014; 84 FR 32616, July 9, 2019]