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[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3655 Introduced in House (IH)]

103d CONGRESS
  1st Session
                                H. R. 3655

 To authorize the Small Business Administration to reduce the interest 
    rate on certain outstanding debentures, and for other purposes.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                           November 22, 1993

 Mr. LaFalce introduced the following bill; which was referred to the 
                      Committee on Small Business

_______________________________________________________________________

                                 A BILL

 
 To authorize the Small Business Administration to reduce the interest 
    rate on certain outstanding debentures, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled, That this Act may be 
cited as ``The Small Business Prepayment Penalty Relief Act of 1993''.

                                TITLE II

    Sec. 201. Buy-Downs and Interest Rate Reductions.--(a) Upon the 
request of the issuer, annually the Administration is authorized to 
buy-down the interest rate on any debenture purchased by the Federal 
Financing Bank (1) which has been issued by a development company 
pursuant to the provisions of section 503 of the Investment Act or (2) 
which has been issued by a small business investment company pursuant 
to the provisions of section 303 of such Act. The buy-down shall be 
limited to the current year only. As used in this section, the term 
``buy-down'' means a payment from the Administration to the Federal 
Financing Bank in an amount determined by the Administration to reduce 
the interest payment for that year to an amount equal to 7.5 per centum 
of the outstanding principal amount of the debenture.
    (b) Upon the request of the issuer, annually the Administration is 
authorized to reduce the interest rate on any debenture issued by a 
small business investment company licensed pursuant to the provisions 
of section 301(d) of the Investment Act. The reduction shall be limited 
to the current year only. The amount of the reduction shall be an 
amount determined by the Administration to make the interest payment 
for that year equal to 7.5 per centum of the outstanding principal 
amount of the debenture, less the amount of any other reductions or 
credits otherwise provided by law.

                               TITLE III

    Sec. 301. Prepayments.--(a) Annually, after the regular 
Appropriations Act has been signed into law providing funding for the 
Administration, the Administration shall calculate the amount needed to 
carry out the provisions of section 201 of this Act. If it determines 
that it has sufficient funding to fully carry out the buy-downs and 
reductions authorized by such section, it shall obtain from the Federal 
Financing Bank a computation of the amount of the prepayment penalty 
which would be required from the issuer of each such debenture if it 
was prepaid as of the end of the current fiscal year. The 
Administration shall also compute the amount of the prepayment penalty 
on 301(d) debentures as if such debentures had been sold to the Federal 
Financing Bank.
    (b) After making the above determinations, the Administration shall 
promptly notify the issuer of each debenture subject to the provisions 
of section 201 of this Act that it will receive offers from any 
interested issuer to prepay the debenture in full. The issuer shall 
include in any offer amount of the full prepayment penalty, or assumed 
prepayment penalty in the case of a debenture from a 301(d) issuer, 
less any amount proposed by the issuer to be paid by the Administration 
pursuant to the provisions of this title. The notification to the 
issuer shall include such information as the Administration determines 
to be appropriate, but shall include--
            (1) the amount of funds available to carry out this title;
            (2) a computation of the total amount of the prepayment 
        penalties and assumed prepayment penalties if all issuers 
        prepaid;
            (3) the amount of the prepayment penalty or assumed 
        prepayment penalty for the issuer receiving the notification;
            (4) the time period during which the Administration will 
        accept offers; and
            (5) a description of the process under which the 
        Administration will evaluate, give priority to, and accept 
        submission of offers pursuant to this title.
    (c) Within 30 days after termination of the period for submission 
of offers, the Administration shall evaluate each offer and shall 
assign each a priority. The priority shall be based upon the per centum 
of the prepayment penalty which the issuer offers to pay, with the 
highest per centum receiving the highest priority. The Administration 
shall approve offers beginning with the one with the highest priority 
and continuing until it utilizes all funds available to carry out this 
title in the current fiscal year.
    Sec. 302. Prepaying Development Company Debentures.--(a) For 
purposes of this section, the term ``issuer'' means the issuer of a 
debenture which has been purchased by the Federal Financing Bank 
pursuant to section 503 of the Investment Act, and the term 
``borrower'' means the small business concern whose loan secures a 
debenture issued pursuant to such section.
    (b) The issuer of a debenture purchased by the Federal Financing 
Bank and guaranteed by the Small Business Administration under section 
503 of the Investment Act may offer to prepay such debenture pursuant 
to section 301 of this Act: Provided, That--
            (1) the debenture is outstanding on the date of enactment 
        of this Act, and neither the loan that secures the debenture 
        nor the debenture is in default on the date the prepayment is 
        made;
            (2) State or personal funds, which may include refinancing 
        under the programs authorized by sections 504 and 505 of the 
        Investment Act are used to prepay the debenture; and
            (3) the issuer certifies that the benefits, net of fees and 
        expenses authorized herein, associated with prepayment of the 
        debenture are entirely passed through to the borrower.
    (c) No fees or penalties other than those specified in this section 
may be imposed as a condition of such prepayment against the issuer or 
the borrower, or the Administration or any fund or account administered 
by the Administration, except as provided in this Act. If the debenture 
is prepaid or refinanced other than through section 504, the issuer may 
require the borrower or pay a fee to the issuer in an amount equal to 
one-half of one percent of the unpaid principal balance of the 
debenture. If a debenture is refinanced with a guarantee pursuant to 
section 504, the issuer may require the borrower to pay a fee to the 
issuer in an amount equal to one-fourth of one percent of the unpaid 
balance of the debenture.
    (d) Debentures refinanced under section 504 shall be subject to all 
of the other provisions of sections 504 and 505 of the Investment Act 
and the rules and regulations of the Administration promulgated 
thereunder, including, but not limited to, payment of authorized 
expenses and commissions, fees and discounts to brokers and dealers in 
trust certificates issued pursuant to section 505: Provided however, 
That the issuer shall be deemed to have waived any origination fee on 
the new debenture to which it otherwise would have been entitled.
    Sec. 303. Prepaying Specialized Small Business Investment Company 
Debentures.--(a) Any specialized small business investment company 
which is the issuer of a debenture purchased by the Administration 
under title III of the Investment Act may offer to prepay the debenture 
pursuant to the provisions of section 301 of this Act: Provided, That--
            (1) the debenture is outstanding on the date of enactment 
        of this Act and is not in default on the date the prepayment is 
        made; and
            (2) personal funds, which may include refinancing with 
        proceeds of debentures under title III of the Investment Act, 
        are used to prepay the debenture, except that if new guaranteed 
        debenture proceeds are utilized, the length of time of the 
        interest rate reduction authorized by such title shall be 
        reduced by the length of time the issuer received an interest 
        rate reduction on the debenture being prepaid.
    (b) No fees or penalties other than those specified in this section 
may be imposed as a condition of such prepayment against the issuer, 
the Administration or any fund or account administered by the 
Administration, except as expressly provided herein.
    Sec. 304. Prepaying Regular Small Business Investment Company 
Debentures.--(a) Any small business investment company which is the 
issuer of a debenture guaranteed by the Administration under title III 
of the Investment Act and purchased by the Federal Financing Bank may 
offer to prepay the debenture pursuant to section 301 of this Act: 
Provided, That--
            (1) the debenture is outstanding on the date of enactment 
        of this Act and is not in default on the date the prepayment is 
        made; and
            (2) personal funds, which may include refinancing with 
        proceeds of guaranteed debentures under title III of the 
        Investment Act, are used to prepay the debenture.
    (b) No fees or penalties other than those specified in this section 
may be imposed as a condition of such prepayment against the issuer, 
the Administration or any fund or account administered by the 
Administration, except as expressly provided herein.
    (c) Debentures refinanced under title III of the Investment Act 
shall be subject to all of the other provisions of such Act, including, 
but not limited to, payment of authorized expenses and commissions, 
fees or discounts to brokers and dealers in trust certificates issued 
pursuant to section 321.

                                TITLE IV

    Sec. 401. Miscellaneous Provisions.--(a) The provisions of this Act 
are exercisable at the option of the borrower under section 302 of this 
Act or at the option of a small business investment company under 
sections 303 and 304 of this Act and are in addition to any prepayment 
options otherwise authorized by law.
    (b) Within sixty days of the date of enactment of this Act, the 
Small Business Administration shall issue regulations to implement this 
Act.
    (c) Any new credit or spending authority provided for in this Act 
is subject to amounts provided for in advance in appropriations acts.
    Sec. 402. Authorization.--(a) There are authorized to be 
appropriated such sums as may be necessary to carry out the provisions 
of this Act.
    (b) In the administration of this Act, the Administration shall not 
obligate any funds pursuant to title III of this Act in any fiscal year 
unless it has provided the full amount of assistance authorized and 
requested pursuant to title II of this Act.
    (c) If sufficient funds are not appropriated for any fiscal year to 
fully carry out the buy-downs and reductions authorized and requested 
pursuant to title II of this Act, the Administration shall buy-down and 
reduce the interest rates to the extent that funds are available for 
that year, but may not utilize any funds to carry out title III.
    Sec. 403. As used in this Act--
            (a) the term ``Administration'' means the Small Business 
        Administration; and
            (b) the term ``Investment Act'' means the Small Business 
        Investment Act of 1958.

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