II

103D CONGRESS

1ST SESSION S. 1252

To amend the Rural Electrification Act of 1936 to permit the prepayment

or repricing of certain loans according to the terms of the applicable

loan contract, and for other purposes.

IN THE SENATE OF THE UNITED STATES

JULY 16 (legislative day, JUNE 30), 1993

Mr. LUGAR (for himself and Mr. DOMENICI) introduced the following bill;

which was read twice and referred to the Committee on Agriculture,

Nutrition, and Forestry

A BILL

To amend the Rural Electrification Act of 1936 to permit

the prepayment or repricing of certain loans according

to the terms of the applicable loan contract, and for

other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. PREPAYMENT OR REPRICING OF REA LOANS.

4 Title III of the Rural Electrification Act of 1936 is

5 amended by inserting after section 306B (7 U.S.C. 936b)

6 the following new section:
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1 ‘‘SEC. 306C. PREPAYMENT OR REPRICING OF LOANS.

2 ‘‘(a) IN GENERAL.—Notwithstanding any other pro3 vision of law, the Secretary of the Treasury and the Ad4 ministrator shall, on request of a borrower, allow the pre5 payment or repricing of a loan made by the Federal Fi6 nancing Bank and guaranteed by the Administrator in ac7 cordance with this section and the terms of the applicable

8 loan contract.

9 ‘‘(b) TERMS OF REPAYMENT AND REPRICING.—

10 ‘‘(1) IN GENERAL.—In the case of a loan made

11 by the Federal Financing Bank and guaranteed by

12 the Administrator that permits prepayment of the

13 loan at any time later than 12 years after the end

14 of the year in which advances were made under the

15 loan on payment of a premium, the borrower of the

16 loan may, at any time prior to the maturity of the

17 loan, prepay or reprice all or any part of the ad18 vances made under the loan in accordance with this

19 subsection.

20 ‘‘(2) PREPAYMENT.—A borrower of a loan de21 scribed in paragraph (1) may prepay the advances

22 by paying the outstanding principal balance of the

23 loan, plus the sum of—

24 ‘‘(A) the net present value of the 1-year in25 terest prepayment premium, as provided under
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1 the terms of the note of the loan of the Federal

2 Financing Bank; and

3 ‘‘(B) for the period of time from the date

4 of prepayment until the end of the 12-year pe5 riod provided for in the note, the net present

6 value of the difference between—

7 ‘‘(i) the income of the note at the ef8 fective interest rate; and

9 ‘‘(ii) the income of the note at an in10 terest rate equal to the then current cost

11 of funds to the Department of the Treas12 ury for obligations of comparable maturity

13 to the remaining term of the loan.

14 ‘‘(3) REPRICING.—A borrower of a loan de15 scribed in paragraph (1) may reprice the loan by

16 paying the sum of—

17 ‘‘(A) the net present value of the 1-year in18 terest prepayment premium, as provided under

19 the terms of the note of the loan of the Federal

20 Financing Bank; and

21 ‘‘(B) for the period of time from the date

22 of repricing until the end of the 12-year period

23 provided for in the note, the net present value

24 of the difference between—
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1 ‘‘(i) the income of the note at the ef2 fective interest rate; and

3 ‘‘(ii) the income of the note at an in4 terest rate equal to the then current cost

5 of funds to the Department of the Treas6 ury for obligations of comparable maturity

7 to the remaining term of the loan.

8 ‘‘(4) LIEN ACCOMMODATION.—If a borrower of

9 a loan described in paragraph (1) elects to prepay

10 an advance on the loan and applies for a loan from

11 a private lender in an amount not to exceed the sum

12 of the advance prepaid amount and any premium on

13 the amount paid pursuant to this section, on the re14 quest of the borrower, the Administrator shall grant

15 the private lender a lien accommodation on the as16 sets of the borrower if the value of the assets subject

17 to the lien will exceed 120 percent of the amount of

18 all of the outstanding loans and guarantees secured

19 under the lien.

20 ‘‘(c) FINANCING THE PREMIUMS.—In the case of a

21 loan described in subsection (b)(1) that is prepaid or re22 priced in accordance with this section, the Administrator

23 may guarantee a loan made to the borrower in an amount

24 equal to the cost of any prepayment or repricing premium

25 required under subparagraph (A) or (B) of subsection
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1 (b)(2) or subparagraph (A) or (B) of subsection (b)(3),

2 as appropriate.

3 ‘‘(d) HARDSHIP PREPAYMENT PROGRAM.—

4 ‘‘(1) PREPAYMENT.—A borrower of a loan

5 made by the Federal Financing Bank and guaran6 teed under section 306 may, at the option of the

7 borrower, prepay the loan or an advance on the loan

8 if the Administrator determines that the borrower is

9 eligible under paragraph (3).

10 ‘‘(2) PROHIBITION ON PREPAYMENT PRE11 MIUMS.—No sums in addition to the payment of the

12 outstanding principal balance due on the loan may

13 be charged against the borrower, as a result of the

14 prepayment.

15 ‘‘(3) ELIGIBILITY.—The Administrator shall

16 allow the repayment of a loan under this subsection

17 if the Administrator determines that the borrower—

18 ‘‘(A) has experienced a severe hardship; or

19 ‘‘(B) serves a predominantly rural, low-in20 come, and high unemployment area for which

21 the electricity rates exceed the Statewide aver22 age.

23 ‘‘(4) NEW LOANS.—On the prepayment of a

24 loan under this subsection and the request of the

25 borrower, the Federal Financing Bank and the Ad-
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1 ministrator shall make a new loan to the borrower

2 available at a level that at least equals the principal

3 amount of the prepayment.

4 ‘‘(5) AUTHORIZATION OF APPROPRIATIONS.—

5 There are authorized to be appropriated such sums

6 as are necessary to provide for the cost (as defined

7 in section 502(5) of the Congressional Budget Act

8 of 1974 (2 U.S.C. 661a(5)) of the waiver under this

9 subsection of prepayment premiums for loans made

10 by the Federal Financing Bank and guaranteed by

11 the Administrator.’’.

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