[Federal Register Volume 77, Number 62 (Friday, March 30, 2012)]
[Notices]
[Pages 19417-19424]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-7620]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

[Docket ID OCC-2011-0028]

FEDERAL RESERVE SYSTEM

[OP-1439]

FEDERAL DEPOSIT INSURANCE CORPORATION


Proposed Guidance on Leveraged Lending

AGENCY: Office of the Comptroller of the Currency, Treasury (``OCC''); 
Board of Governors of the Federal Reserve System (``Board'' or 
``Federal Reserve''); and the Federal Deposit Insurance Corporation 
(``FDIC'').

ACTION: Proposed joint guidance with request for public comment.

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SUMMARY: The OCC, Board, and the FDIC (collectively, the Agencies) 
request comment on proposed guidance on leveraged lending (proposed 
guidance).

[[Page 19418]]

The proposed guidance outlines high-level principles related to safe 
and sound leveraged lending activities, including underwriting 
considerations, assessing and documenting enterprise value, risk 
management expectations for credits awaiting distribution, stress 
testing expectations and portfolio management, and risk management 
expectations. This proposed guidance would apply to all Federal 
Reserve-supervised, FDIC-supervised, and OCC-supervised financial 
institutions substantively engaged in leveraged lending activities. The 
number of community banking organizations with substantial exposure to 
leveraged lending is very small; therefore the Agencies generally 
expect that community banking organizations largely would be unaffected 
by this guidance.

DATES: Comments must be submitted on or before June 8, 2012.

ADDRESSES: 

OCC

    Please use the title ``Proposed Leveraged Lending Guidance'' to 
facilitate the organization and distribution of the comments. You may 
submit comments by any of the following methods:
    <bullet> Email: <a href="/cdn-cgi/l/email-protection#95e7f0f2e6bbf6faf8f8f0fbe1e6d5faf6f6bbe1e7f0f4e6bbf2fae3"><span class="__cf_email__" data-cfemail="9fedfaf8ecb1fcf0f2f2faf1ebecdff0fcfcb1ebedfafeecb1f8f0e9">[email protected]</span></a>.
    <bullet> Mail: Office of the Comptroller of the Currency, 250 E 
Street SW., Mail Stop 2-3, Washington, DC 20219.
    <bullet> Fax: (202) 874-5274.
    <bullet> Hand Delivery/Courier: 250 E Street SW., Mail Stop 2-3, 
Washington, DC 20219.
    Instructions: You must include ``OCC'' as the agency name and 
``Docket Number OCC-2011-0028'' in your comment. In general, OCC will 
enter all comments received into the docket and publish them on the 
Regulations.gov Web site without change, including any business or 
personal information that you provide such as name and address 
information, email addresses, or phone numbers. Comments received, 
including attachments and other supporting materials, are part of the 
public record and subject to public disclosure. Do not enclose any 
information in your comment or supporting materials that you consider 
confidential or inappropriate for public disclosure.
    You may review comments and other related materials that pertain to 
this notice by any of the following methods:
    <bullet> Viewing Comments Personally: You may personally inspect 
and photocopy comments at the OCC, 250 E Street SW., Washington, DC. 
For security reasons, the OCC requires that visitors make an 
appointment to inspect comments. You may do so by calling (202) 874-
4700. Upon arrival, visitors will be required to present valid 
government-issued photo identification and to submit to security 
screening in order to inspect and photocopy comments.
    <bullet> Docket: You may also view or request available background 
documents and project summaries using the methods described above.

Board

    When submitting comments, please consider submitting your comments 
by email or fax because paper mail in the Washington, DC, area and at 
the Board may be subject to delay. You may submit comments, identified 
by Docket No. OP-1439, by any of the following methods:
    <bullet> Agency Web Site: http://www.federalreserve.gov. Follow the 
instructions for submitting comments at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
    <bullet> Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
    <bullet> Email: <a href="/cdn-cgi/l/email-protection#72001715015c111d1f1f171c0601321417161700131e001701170004175c151d04"><span class="__cf_email__" data-cfemail="47352220346924282a2a22293334072122232235262b3522342235312269202831">[email protected]</span></a>. Include docket 
number in the subject line of the message.
    <bullet> FAX: (202) 452-3819 or (202) 452-3102.
    <bullet> Mail: Jennifer J. Johnson, Secretary, Board of Governors 
of the Federal Reserve System, 20th Street and Constitution Avenue NW., 
Washington, DC 20551.
    All public comments are available from the Board's Web site at 
http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as 
submitted, unless modified for technical reasons. Accordingly, your 
comments will not be edited to remove any identifying or contact 
information. Public comments may also be viewed electronically or in 
paper form in Room MP-500 of the Board's Martin Building (20th and C 
Street NW., Washington, DC 20551) between 9 a.m. and 5 p.m. on 
weekdays.
    FDIC: You may submit comments by any of the following methods:
    <bullet> Agency Web site: http://www.FDIC.gov/regulations/laws/federal/propose.html. Follow the instructions for submitting comments.
    <bullet> Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
    <bullet> Email: <a href="/cdn-cgi/l/email-protection#bcdfd3d1d1d9d2c8cffcfaf8f5ff92dbd3ca"><span class="__cf_email__" data-cfemail="e0838f8d8d858e9493a0a6a4a9a3ce878f96">[email protected]</span></a>. Include ``Leveraged Lending 
Guidance'' in the subject line of the message. Comments received will 
be posted without change to http://www.FDIC.gov/regulations/laws/federal/propose.html, including any personal information provided.
    <bullet> Mail: Robert E. Feldman, Executive Secretary, Attention: 
Comments/Legal ESS, Federal Deposit Insurance Corporation, 550 17th 
Street NW., Washington, DC 20429.
    <bullet> Hand Delivery/Courier: Guard station at the rear of the 
550 17th Street Building (located on F Street), on business days 
between 7 a.m. and 5 p.m. (EDT).

FOR FURTHER INFORMATION CONTACT: 
    OCC: Louise Francis, Commercial Credit Technical Expert, 202-874-
5170, 250 E Street SW., Washington, DC 20219.
    Board: Lawrence A. Rufrano, Senior Financial Analyst, (202) 452-
2808, Mary Aiken, Manager, Risk Policy, (202) 452-2904, or Benjamin W. 
McDonough, Senior Counsel, (202) 452-2036, Legal Division, Board of 
Governors of the Federal Reserve System, 20th and C Streets NW., 
Washington, DC 20551.
    FDIC: William R. Baxter, Senior Examination Specialist, 202-898-
8514, <a href="/cdn-cgi/l/email-protection#740316150c0011063412101d175a131b02"><span class="__cf_email__" data-cfemail="314653504945544371575558521f565e47">[email protected]</span></a>, 550 17th Street NW., Washington, DC 20429.

SUPPLEMENTARY INFORMATION:

I. Background

    All financial institutions \1\ should have the capacity to properly 
evaluate and monitor underwritten credit risks, to understand the 
effect of changes in borrowers' enterprise values upon credit portfolio 
quality, and to assess the sensitivity of future credit losses to 
changes in enterprise values. Further, in underwriting such credits, 
institutions need to ensure that borrowers are able to repay credit as 
due and at the same time that borrowers have capital structures, 
including their bank borrowings and other debt, that support the 
borrower's continued operations through economic cycles (that is, have 
a sustainable capital structure). Institutions should also be able to 
demonstrate that they understand their risks and the potential impact 
of stressful events and circumstances on borrowers' financial 
condition. The Agencies have previously provided guidance to financial 
institutions for their involvement in leveraged lending. The recent 
financial crisis further underscored the need for banking organizations 
to employ sound

[[Page 19419]]

underwriting, to ensure that the risks in leveraged lending activities 
are appropriately incorporated in the Allowance for Loan and Lease 
Losses and capital adequacy analyses, to monitor the sustainability of 
their borrowers' capital structures, and to incorporate stress testing 
into their risk management of both leveraged portfolios and 
distribution pipelines, as banking organizations unprepared for 
stressful events and circumstances can suffer acute threats to their 
financial condition and viability. The proposed guidance is intended to 
be consistent with industry practices while building upon the recently 
proposed guidance on Stress Testing.\2\
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    \1\ For purposes of this guidance, the term ``financial 
institution'' means national banks, federal savings associations, 
and Federal branches and agencies supervised by the OCC; state 
member banks, bank holding companies, and all other institutions for 
which the Federal Reserve is the primary federal supervisor; and 
state nonmember insured banks and other institutions supervised by 
the FDIC.
    \2\ ``Annual Stress Test,'' Notice of Proposed Rulemaking, 77 FR 
3408 (January 24, 2012).
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II. Principal Elements of the Proposed Guidance

    In April 2001, the Agencies (and Office of Thrift Supervision) 
issued guidance \3\ regarding sound practices for leveraged finance \4\ 
activities (2001 Guidance). The 2001 Guidance addressed expectations 
for the content of credit policies, the need for well-defined 
underwriting standards, the importance of defining an institution's 
risk appetite for leveraged transactions, and the importance of stress 
testing exposures and portfolios.
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    \3\ SR 01-9, ``Interagency Guidance on Leveraged Financing,'' 
April 17, 2001, OCC Bulletin 2001-8, FDIC Press Release PR-28-2001.
    \4\ For the purpose of this guidance, references to leveraged 
finance or leveraged transactions encompass the entire debt 
structure of a leveraged obligor (including senior loans and letters 
of credit, mezzanine tranches, senior and subordinated bonds). 
References to leveraged lending and leveraged loan transactions and 
credit agreements refer to the senior loan and letter of credit 
tranches held by both bank and non-bank investors.
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    Since the issuance of that guidance, the Agencies have observed 
tremendous growth in the volume of leveraged credit and in the 
participation of non-regulated investors. As the market has grown, debt 
agreements have frequently included features that provided relatively 
limited lender protection, including the absence of meaningful 
maintenance covenants in loan agreements and the inclusion of payment-
in-kind (PIK)-toggle features in junior capital instruments (i.e., a 
feature where the borrower has the option to pay interest in cash or 
in-kind, which increases the principal owed), both of which lessen 
lenders' recourse in the event that a borrower's performance does not 
meet projections. Further, the capital structures and repayment 
prospects for some transactions, whether originated to hold or 
distribute, have at times been aggressive in light of the overall risk 
of the credit.
    Absent meaningful limits and to support burgeoning demand from 
institutional investors, the pipeline of aggressively priced and 
structured commitments has grown rapidly. Further, management 
information systems (MIS) at some institutions have proven less than 
satisfactory in accurately aggregating exposures on a timely basis, and 
many institutions have found themselves holding large pipelines of 
higher-risk commitments at a time when buyer demand for risky assets 
diminished significantly.
    In light of these changes, the Agencies have decided to replace the 
2001 Guidance with new leveraged finance guidance (proposed guidance). 
The proposed guidance describes expectations for the sound risk 
management of leveraged finance activities, including the importance of 
institutions developing and maintaining:
    <bullet> Transactions that are structured to reflect a sound 
business premise, an appropriate capital structure, and reasonable cash 
flow and balance sheet leverage. Combined with supportable performance 
projections, these considerations should clearly support a borrower's 
capacity to repay and de-lever to a sustainable level over a reasonable 
period, whether underwritten to hold or distribute.
    <bullet> A definition of leveraged finance that facilitates 
consistent application across all business lines.
    <bullet> Well-defined underwriting standards that, among other 
things, define acceptable leverage levels and describe amortization 
expectations for senior and subordinate debt.
    <bullet> A credit limit and concentration framework that is 
consistent with the institution's risk appetite.
    <bullet> Sound MIS that enable management to identify, aggregate, 
and monitor leveraged exposures and comply with policy across all 
business lines.
    <bullet> Strong pipeline management policies and procedures that, 
among other things, provide for real-time information on exposures and 
limits, and exceptions to the timing of expected distributions and 
approved hold levels.
    The proposed guidance replaces existing leveraged finance guidance 
and forms the basis of the Agencies' supervisory focus and review of 
supervised financial institutions, including, as applicable, 
subsidiaries and affiliates involved in leveraged lending. In 
implementing the guidance, the Agencies will consider the size and risk 
profile of an institution's leveraged portfolio relative to its assets, 
earnings, liquidity, and capital. Although some sections of this 
proposal are intended to apply to all leveraged lending transactions 
(e.g., underwriting), the vast majority of community banks should not 
be affected by this guidance as they have no exposure to leveraged 
credits. The limited number of community and smaller institutions that 
are involved in leveraged lending activities should discuss with their 
primary regulator implementation of cost-effective controls appropriate 
for the complexity of their exposures and activities.

III. Administrative Law Matters

A. Paperwork Reduction Act Analysis

    In accordance with the Paperwork Reduction Act (PRA) of 1995 (44 
U.S.C. 3506; 5 CFR part 1320, Appendix A.1), the Agencies reviewed the 
proposed guidance. The Agencies may not conduct or sponsor, and an 
organization is not required to respond to, an information collection 
unless the information collection displays a currently valid OMB 
control number. The Agencies have determined that certain aspects of 
the proposed guidance may constitute a collection of information. In 
particular, these aspects are the provisions that state a banking 
organization should (i) have underwriting policies for leveraged 
lending, including stress testing procedures for leveraged credits; 
(ii) have risk management policies, including stress testing procedures 
for pipeline exposures; and (iii) have policies and procedures for 
incorporating the results of leveraged credit and pipeline stress tests 
into the firm's overall stress testing framework. The frequency of 
information collection is estimated to be annual. Respondents are 
banking organizations with leveraged lending activities as defined in 
the guidance.
    Report Title: Guidance on Leveraged Lending.
    Frequency of Response: Annual.
    Affected Public: Banking Organizations with Leveraged Lending.

OCC

    OMB Control No.: To be assigned by OMB.
    Estimated number of respondents: 25.
    Estimated average time per respondent: 1,350.4 hours to build; 
1,705.6 hours for ongoing use.
    Estimated total annual burden hours: 33,760 hours to build, 42,640 
hours for ongoing use.

Board

    Agency information collection number: FR 4203.

[[Page 19420]]

    OMB Control No.: To be assigned by OMB.
    Estimated number of respondents: 41.
    Estimated average time per respondent: 1,064.4 hours to build, 
754.4 hours for ongoing use.
    Estimated total annual burden hours: 43,640 hours to build; 30,930 
hours for ongoing use.

FDIC

    OMB Control No.: To be assigned by OMB.
    Estimated number of respondents: 9.
    Estimated average time per respondent: 986.7 hours to build; 529.3 
hours for ongoing use.
    Estimated total annual burden hours: 8,880 hours to build, 4,764 
hours for ongoing use.
    The estimated time per respondent is an average that varies by 
agency because of differences in the composition of the institutions 
under each agency's supervision (e.g., size distribution of 
institutions) and volume of leveraged lending activities.
    The Agencies invite comments on the following:
    (1) Whether the proposed collection of information is necessary for 
the proper performance of the regulatory function; including whether 
the information has practical utility;
    (2) The accuracy of the estimates of the burden of the proposed 
information collection, including the cost of compliance;
    (3) Ways to enhance the quality, utility, and clarity of the 
information to be collected; and
    (4) Ways to minimize the burden of information collection on 
respondents, including through the use of automated collection 
techniques or other forms of information technology.
    Additionally, please send a copy of your comments regarding these 
proposed information collections by mail to: Desk Officer, U.S. Office 
of Management and Budget, 725 17th Street NW., <greek-i>10235, 
Washington, DC 20503, or by fax to (202) 395-6974.
    These information collections are authorized pursuant to the 
following statutory authorities:
    OCC: National Bank Act, (12 U.S.C. 1 et seq.; 12 U.S.C. 161) and 
the International Banking Act (12 U.S.C. 3101 et seq.)
    Board: Sections 11(a), 11(i), 25, and 25A of the Federal Reserve 
Act (12 U.S.C. 248(a), 248(i), 602, and 611), section 5 of the Bank 
Holding Company Act (12 U.S.C. 1844), and section 7(c) of the 
International Banking Act (12 U.S.C. 3105(c)).
    FDIC: Federal Deposit Insurance Act, (12 U.S.C. 1811 et seq.) and 
the International Banking Act (12 U.S.C. 3101 et seq.).
    The agencies expect to review the policies and procedures for 
stress testing as part of their supervisory processes. To the extent 
they collect information during an examination of a banking 
organization, confidential treatment may be afforded to the records 
under exemption 8 of the Freedom of Information Act (FOIA), 5 U.S.C. 
552(b)(8).

B. Regulatory Flexibility Act Analysis

    While the guidance is not being adopted as a rule, the Agencies 
have considered the potential impact of the proposed guidance on small 
banking organizations using the considerations that would apply if the 
Regulatory Flexibility Act (5 U.S.C. 603(b)) were applicable. For the 
reason discussed in the Supplementary Information above, the Agencies 
are issuing the proposed guidance to emphasize the importance of 
properly underwriting leveraged lending transactions and incorporating 
those exposures into stress and capital tests for institutions with 
significant exposures to these credits. Based on its analysis and for 
the reasons stated below, the Agencies believe that the proposed 
guidance will not have a significant economic impact on a substantial 
number of small entities. Nevertheless, the Agencies are seeking 
comment on whether the proposed guidance would impose undue burdens on, 
or have unintended consequences for, small organizations.
    Under regulations issued by the Small Business Administration 
(SBA), a small banking organization is defined as a banking 
organization with total assets of $175 million or less. See 13 CFR 
121.201. The guidance being proposed by the Agencies is intended for 
banking organizations supervised by the Agencies with substantial 
exposures to leveraged lending activities, including national banks, 
federal savings associations, state nonmember banks, state member 
banks, bank holding companies, and U.S. branches and Agencies of 
foreign banking organizations. Given the sheer size of leveraged 
lending transactions, most of which exceed $50 million, and the 
Agencies' observations that leveraged loans tend to be held primarily 
by large or global banking institutions with total assets that are well 
above $175 million, the effects of this guidance upon smaller 
institutions are expected to be negligible. Banking organizations that 
are subject to the proposed guidance therefore substantially exceed the 
$175 million total asset threshold at which a banking organization is 
considered a small banking organization under SBA regulations.
    In light of the foregoing, the Agencies believe that the proposed 
guidance, if adopted in final form, would not have a significant 
economic impact on a substantial number of small entities. As noted 
above, the Agencies specifically seek comment on whether the proposed 
guidance would impose undue burdens on, or have unintended consequences 
for, small organizations and whether there are ways such potential 
burdens or consequences could be addressed in a manner consistent with 
the guidance.

IV. Proposed Guidance

    The text of the proposed guidance is as follows:

Purpose

    In April 2001, the Agencies (Office of the Comptroller of the 
Currency, Board of Governors of the Federal Reserve System, Federal 
Deposit Insurance Corporation, and Office of Thrift Supervision) 
issued guidance \5\ regarding sound practices for leveraged finance 
\6\ activities (2001 Guidance). The 2001 Guidance addressed 
expectations for the content of credit policies, the need for well-
defined underwriting standards, the importance of defining an 
institution's risk appetite for leveraged transactions, and the 
importance of stress testing exposures and portfolios.
---------------------------------------------------------------------------

    \5\ SR 01-9, ``Interagency Guidance on Leveraged Financing,'' 
April 17, 2001, OCC Bulletin 2001-8, FDIC Press Release PR-28-2001.
    \6\ For the purpose of this guidance, references to leveraged 
finance or leveraged transactions encompass the entire debt 
structure of a leveraged obligor (including senior loans and letters 
of credit, mezzanine tranches, senior and subordinated bonds). 
References to leveraged lending and leveraged loan transactions and 
credit agreements refer to the senior loan and letter of credit 
tranches held by both bank and non-bank investors.
---------------------------------------------------------------------------

    Since the issuance of that guidance, the Agencies have observed 
tremendous growth in the volume of leveraged credit and in the 
participation of non-regulated investors. As the market has grown, 
debt agreements have frequently included features that provided 
relatively limited lender protection, including the absence of 
meaningful maintenance covenants in loan agreements and the 
inclusion of payment-in-kind (PIK)-toggle features in junior capital 
instruments, both of which lessened lenders' recourse in the event 
of a borrower's subpar performance. Further, the capital structures 
and repayment prospects for some transactions, whether originated to 
hold or distribute, have at times been aggressive.
    Absent meaningful limits and to support burgeoning demand from 
institutional investors, the pipeline of aggressively priced and 
structured commitments has grown rapidly. Further, management 
information systems (MIS) at some institutions have proven less than 
satisfactory in accurately aggregating exposures on a timely basis, 
and many institutions have found themselves holding large pipelines 
of higher-risk

[[Page 19421]]

commitments at a time when buyer demand for risky assets diminished 
significantly.
    In light of these changes, the Agencies have decided to replace 
the 2001 Guidance with new leveraged finance guidance (2012 
Guidance). The 2012 Guidance describes expectations for the sound 
risk management of leveraged finance activities, including the 
importance for institutions to develop and maintain:
    <bullet> Transactions that are structured to reflect a sound 
business premise, an appropriate capital structure, and reasonable 
cash flow and balance sheet leverage. Combined with supportable 
performance projections, these should clearly support a borrower's 
capacity to repay and de-lever to a sustainable level over a 
reasonable period, whether underwritten to hold or distribute.
    <bullet> A definition of leveraged finance that facilitates 
consistent application across all business lines.
    <bullet> Well-defined underwriting standards that, among other 
things, define acceptable leverage levels and describe amortization 
expectations for senior and subordinate debt.
    <bullet> A credit limit and concentration framework that is 
consistent with the institution's risk appetite.
    <bullet> Sound MIS that enable management to identify, 
aggregate, and monitor leveraged exposures and comply with policy 
across all business lines.
    <bullet> Strong pipeline management policies and procedures 
that, among other things, provide for real-time information on 
exposures and limits, and exceptions to the timing of expected 
distributions and approved hold levels.

Applicability

    This issuance replaces existing leveraged finance guidance and 
forms the basis of the Agencies' supervisory focus and review of 
supervised financial institutions, including subsidiaries and 
affiliates. Implementation of this guidance should be consistent 
with the size and risk profile of an institution's leveraged 
portfolio relative to its assets, earnings, liquidity, and capital. 
Although some sections of this guidance should apply to all 
leveraged transactions (e.g., underwriting), the vast majority of 
community banks should not be affected by this guidance as they have 
no exposure to leveraged credits. The limited number of community 
and smaller institutions that have leveraged lending activities 
should discuss with their primary regulator implementation of cost-
effective controls appropriate for the complexity of their exposures 
and activities.

Risk Management Framework

    Given the high risk profile of leveraged exposures, institutions 
engaged in leveraged financing should adopt a risk management 
framework that has an intensive and frequent review and monitoring 
process. The framework should have as its foundation written risk 
objectives, risk acceptance criteria, and risk controls. The lack of 
robust risk management processes and controls in institutions with 
significant leveraged finance activities could contribute to a 
finding that the institution is engaged in an unsafe and unsound 
banking practice. This guidance outlines minimum regulatory 
expectations and covers the following topics:
    <bullet> Definition of Leveraged Finance.
    <bullet> General Policy Expectations.
    <bullet> Underwriting Standards.
    <bullet> Valuation Standards.
    <bullet> Pipeline Management.
    <bullet> Reporting and Analytics.
    <bullet> Rating Leveraged Loans.
    <bullet> Other Key Risk Management Components.
    <bullet> Credit Analysis.
    <bullet> Problem Credits.
    <bullet> Deal Sponsors.
    <bullet> Credit Review.
    <bullet> Conflicts of Interest.
    <bullet> Anti-tying.
    <bullet> Reputation Risk.
    <bullet> Securities Laws.
    <bullet> Compliance.

Definition of Leveraged Finance

    Institutions' policies should include criteria to define 
leveraged finance. Numerous definitions of leveraged finance exist 
throughout the financial services industry and commonly contain some 
combination of the following:
    <bullet> Proceeds are used for buyouts, acquisitions, or capital 
distributions.
    <bullet> Transactions where the borrower's Total Debt/EBITDA 
(earnings before interest, taxes, depreciation, and amortization) or 
Senior Debt/EBITDA exceed 4.0X EBITDA or 3.0X EBITDA, respectively, 
or other defined levels appropriate to the industry or sector.\7\
---------------------------------------------------------------------------

    \7\ Cash should not be netted against debt for purposes of this 
calculation.
---------------------------------------------------------------------------

    <bullet> Borrower that is recognized in the debt markets as a 
highly leveraged firm, which is characterized by a high debt-to-net-
worth ratio.
    <bullet> Transactions where the borrower's post-financing 
leverage, when measured by its leverage ratios, debt-to-assets, 
debt-to-net-worth, debt-to-cash flow, or other similar standards 
common to particular industries or sectors, significantly exceeds 
industry norms or historical levels.\8\
---------------------------------------------------------------------------

    \8\ Higher quality borrowers not initially designated as part of 
the leveraged portfolio, but which otherwise meet the institution's 
definition, should be added to the portfolio if their financial 
performance and prospects deteriorate (i.e., fallen angels).
---------------------------------------------------------------------------

    Institutions engaging in this type of activity should define 
leveraged finance within their policies in a manner sufficiently 
detailed to ensure consistent application across all business lines.
    Examiners should expect the bank's definition to describe 
clearly the purposes and financial characteristics common to these 
transactions, and this definition should include the bank's exposure 
to financial vehicles, whether or not leveraged, that engage in 
leveraged finance activities.

General Policy Expectations

    An institution's credit policies and procedures for leveraged 
finance should address the following items:
    <bullet> Management should identify the institution's risk 
appetite, which should include clearly defined amounts of leveraged 
finance that the institution is willing to underwrite (pipeline 
limits) and leveraged loans it is willing to retain (i.e., 
transaction and aggregate hold levels). The designated risk appetite 
should be supported by an analysis of the potential effect on 
earnings, capital, liquidity, and other risks that result from these 
positions, and should be approved by the board of directors.
    <bullet> A limit framework that includes limits or guidelines 
for single obligors and transactions, aggregate hold portfolio, 
aggregate pipeline exposure, and industry and geographic 
concentrations. The limit framework should identify the related 
approval authorities and exception tracking provisions. In addition 
to notional pipeline limits, underwriting limit frameworks that 
assess stress losses, flex terms, economic capital usage, and 
earnings at risk or otherwise provide a more nuanced view of 
potential risk are expected from institutions with significant 
leveraged finance exposure.
    <bullet> Ensuring that the risks of leveraged lending activities 
are appropriately reflected in an institution's Allowance for Loan 
and Lease Losses and capital adequacy analyses.
    <bullet> Credit and underwriting approval authorities, including 
the procedures for approving and documenting changes to approved 
transaction structures and terms.
    <bullet> Appropriate oversight by senior management, including 
adequate and timely reporting to the board.
    <bullet> The expected risk-adjusted returns for leveraged 
transactions.
    <bullet> Minimum underwriting standards (see Underwriting 
Standards below).
    <bullet> The degree to which underwriting practices may differ 
between primary loan origination and secondary loan acquisition.

Underwriting Standards

    An institution's underwriting standards should be clear, 
written, measurable, and accurately reflect the institution's risk 
appetite for leveraged finance transactions. Institutions should 
have clear underwriting limits regarding leveraged transactions, 
including the size that the institution will arrange both 
individually and in the aggregate for distribution. Originating 
institutions should be mindful of reputational risks associated with 
poorly underwritten transactions, which may find their way into a 
wide variety of investment instruments and exacerbate systemic risks 
within the general economy. At a minimum, underwriting standards 
should consider:
    <bullet> Whether the business premise for each transaction is 
sound and its capital structure is sustainable regardless of whether 
the transaction is underwritten for the institution's own portfolio 
or with the intent to distribute. The entirety of a borrower's 
capital structure should reflect the application of sound financial 
analysis and underwriting principles.
    <bullet> A borrower's capacity to repay and its ability to de-
lever to a sustainable level over a reasonable period. As a general 
guide, base case cash-flow projections should show the ability over 
a five-to-seven year period to fully amortize senior secured debt or 
repay at least 50 percent of total debt. Projections should also 
include one or more realistic downside scenarios that reflect the 
key risks identified in the transaction.

[[Page 19422]]

    <bullet> Expectations for the depth and breadth of due diligence 
on leveraged transactions. This should include standards for 
evaluating various types of collateral, and it should clearly define 
credit risk management's role in such due diligence.
    <bullet> Standards for evaluating expected risk-adjusted 
returns. The standards should include identification of expected 
distribution strategies, including alternative strategies for 
funding and disposing of positions during market disruptions, and 
the potential for losses during such periods.
    <bullet> Degree of reliance on enterprise value and other 
intangible assets for loan repayment, along with acceptable 
valuation methodologies, and guidelines for the frequency of 
periodic reviews of those values.
    <bullet> Expectations for the degree of support provided by the 
sponsor (if any), taking into consideration their financial 
capacity, the extent of their capital contribution at inception, and 
other motivating factors.
    <bullet> Whether credit agreement terms allow for the material 
dilution, sale or exchange of collateral or cash flow-producing 
assets without lender approval.
    <bullet> Credit agreement covenant protections, including 
financial performance (such as debt to cash flow, interest coverage 
or fixed charge coverage), reporting requirements, and compliance 
monitoring. Generally, a leverage level after planned asset sales 
(i.e., debt that must be serviced from operating cash flow) in 
excess of 6x for Total Debt/EBITDA raises concerns for most 
industries.
    <bullet> Collateral requirements in credit agreements that 
specify acceptable collateral and risk-appropriate measures and 
controls, including acceptable collateral types, loan-to-value 
guidelines, and appropriate collateral valuation methodologies. 
Standards for asset-based loans should also outline expectations for 
the use of collateral controls (e.g., inspections, independent 
valuations, and lockbox), other types of collateral and account 
maintenance agreements, and periodic reporting requirements.
    <bullet> Whether loan agreements provide for distribution of 
ongoing financial and other relevant credit information to all 
participants/investors.
    Nothing in the preceding standards should be considered to 
discourage providing financing to borrowers engaged in workout 
negotiations, or as part of a pre-packaged financing under the 
bankruptcy code. Neither are they meant to discourage well-
structured standalone asset-based credit facilities to borrowers 
with strong lender monitoring and controls, for which banks should 
consider separate underwriting and risk rating guidance.

Valuation Standards

    Lenders often rely upon enterprise value and other intangibles 
when (1) evaluating the feasibility of a loan request, (2) 
determining the debt reduction potential of planned asset sales, (3) 
assessing a borrower's ability to access the capital markets, and 
(4) estimating the strength of a secondary source of repayment. 
Lenders may also view enterprise value as a useful benchmark for 
assessing a sponsor's economic incentive to provide financial 
support. Given the specialized knowledge needed for the development 
of a credible enterprise valuation and the importance of enterprise 
valuations in the underwriting and ongoing risk assessment 
processes, enterprise valuations should be performed or validated by 
qualified persons independent of the origination function.
    Conventional appraisal theory provides three approaches for 
valuing closely held businesses--asset, income, and market. Asset 
approach methods consider an enterprise's underlying assets in terms 
of its net going-concern or liquidation value. Income approach 
methods consider an enterprise's ongoing cash flows or earnings and 
apply appropriate capitalization or discounting techniques. Market 
approach methods derive value multiples from comparable company data 
or sales transactions. Although value estimates should reconcile 
results from the use of all three approaches, the income approach is 
generally considered the most common and reliable method. There are 
two common methods to the income approach. The ``capitalized cash 
flow'' method determines the value of a company as the present value 
of all the future cash flows that the business can generate in 
perpetuity. An appropriate cash flow is determined and then divided 
by a risk-adjusted capitalization rate, most commonly the weighted 
average cost of capital. This method is most appropriate when cash 
flows are predictable and stable. The ``discounted cash flow'' 
method is a multiple-period valuation model that converts a future 
series of cash flows into current value by discounting those cash 
flows at a rate of return (discount rate) that reflects the risk 
inherent therein and matches the cash flow. This method is most 
appropriate when future cash flows are cyclical or variable between 
periods. Both methods involve numerous assumptions, and supporting 
documentation should therefore fully explain the evaluator's 
reasoning and conclusions.
    When an obligor is experiencing a financial downturn or facing 
adverse market conditions, a lender should reflect those adverse 
conditions in its assumptions for key variables such as cash flow, 
earnings, and sales multiples when assessing enterprise value as a 
potential source of repayment. Changes in the value of a firm's 
assets should be tested under a range of stress scenarios, including 
business conditions more adverse than the base case scenario. Stress 
testing of enterprise values and their underlying assumptions should 
be conducted and documented both at origination of the transaction 
and periodically thereafter, incorporating the actual performance of 
the borrower and any adjustments to projections. The institution 
should perform its own discounted cash flow analysis to validate the 
enterprise value implied by proxy measures such as multiples of cash 
flow, earnings, or sales.
    Valuations derived with even the most rigorous valuation 
procedures are imprecise and ultimately may not be realized. 
Therefore, institutions relying on enterprise value or illiquid and 
hard-to-value collateral should have policies that provide for 
appropriate loan-to-value ratios, discount rates, and collateral 
margins. Based on the nature of an institution's leveraged lending 
activities, establishing limits for the proportion of individual 
transactions and the total portfolio that are supported by 
enterprise value may be appropriate. Whatever the methodology, 
assumptions underlying enterprise valuations should be clearly 
documented, well supported, and understood by institutions' 
appropriate decision-makers and risk oversight units. Examiners 
should ensure that the valuation approach is appropriate for the 
company's industry and condition.

Pipeline Management

    Market disruptions can substantially impede the ability of an 
underwriter to consummate syndications or otherwise sell down 
exposures, which may result in material losses. Accordingly, 
institutions should have strong risk management and controls over 
transactions in the pipeline, including amounts to be held and those 
to be distributed. An institution should be able to differentiate 
transactions according to tenor, investor class (e.g., pro-rata, 
institutional), structure, and key borrower characteristics (e.g., 
industry). In addition, an institution should develop and maintain:
    <bullet> A clearly articulated and documented appetite for 
underwriting risk that considers the potential effects on earnings, 
capital, liquidity, and other risks that result from these 
positions.
    <bullet> Written procedures for defining and managing 
distribution fails and ``hung'' deals, which are identified by an 
inability to sell down the exposure within a reasonable period 
(generally 90 days from closing). The institution's board should 
establish clear expectations for the disposition of pipeline 
transactions that have not been sold according to their original 
distribution plan. Such transactions that are subsequently 
reclassified as hold-to-maturity should also be included in reports 
to management and the board of directors.
    <bullet> Guidelines for conducting periodic stress tests on 
pipeline exposures to quantify the potential impact of changing 
economic/market conditions on asset quality, earnings, liquidity, 
and capital.
    <bullet> Controls to monitor performance of the pipeline against 
original expectations, and regular reports of variances to 
management, including the amount and timing of syndication/
distribution variances, and reporting if distribution was achieved 
through a recourse sale.
    <bullet> Reports that include individual and aggregate 
transaction information that accurately portrays risk and 
concentrations in the pipeline.
    <bullet> Limits on aggregate pipeline commitments and periodic 
testing of such exposures under different market scenarios.
    <bullet> Limits on the amount of loans that an institution is 
willing to retain on its own books (i.e., borrower/counterparty and 
aggregate hold levels), and limits on the underwriting risk that 
will be undertaken for amounts intended for distribution.
    <bullet> Policies and procedures that identify acceptable 
accounting methodologies and controls in both functional as well as

[[Page 19423]]

dysfunctional markets, and that direct prompt recognition of losses 
in accordance with generally accepted accounting principles.
    <bullet> Policies and procedures addressing the use of hedging 
to reduce pipeline and hold exposures. Policies should address 
acceptable types of hedges and the terms considered necessary for 
providing hedge credit (netting) for exposure measurement.
    <bullet> Plans and provisions addressing contingent liquidity 
and compliance with Regulation W (12 CFR part 223) when market 
illiquidity or credit conditions change, interrupting normal 
distribution channels.

Reporting and Analytics

    The Agencies expect financial institutions to diligently monitor 
higher risk credits, including leveraged loans. An institution's 
management should receive comprehensive reports about the 
characteristics and trends in such exposures at least quarterly, and 
summaries should be provided to the board of directors. Policies 
should identify the fields to be populated and captured by an 
institution's MIS, which should yield accurate and timely reporting 
to management and the board that may include:
    <bullet> Individual and portfolio exposures within and across 
all business lines and legal vehicles, including the pipeline.
    <bullet> Risk rating distribution and migration analysis, 
including maintenance of a list of those borrowers who have been 
removed from the leveraged portfolio due to changes in their 
financial characteristics and overall risk profile.
    <bullet> Industry mix and maturity profile.
    <bullet> Metrics derived from probabilities of default and loss 
given default.
    <bullet> Portfolio performance measures, including noncompliance 
with covenants, restructurings, delinquencies, non-performing 
amounts and charge-offs.
    <bullet> Amount of impaired assets and the nature of impairment 
(i.e., permanent, temporary), and the amount of the Allowance for 
Loan and Lease Losses attributable to leveraged lending.
    <bullet> The aggregate level of policy exceptions and the 
performance of that portfolio.
    <bullet> Exposure by collateral type, including unsecured 
transactions and those where enterprise value is a source of 
repayment for leveraged loans. Reporting should also consider the 
implications of defaults that trigger pari passu treatment for all 
lenders and thus dilute secondary support from collateral value.
    <bullet> Secondary market pricing data and trading volume when 
available.
    <bullet> Exposure and performance by deal sponsor.
    <bullet> Gross and net exposures, hedge counterparty 
concentrations, and policy exceptions.
    <bullet> Actual versus projected distribution of the syndicated 
pipeline, with regular reports of excess levels over the hold 
targets for syndication inventory. Pipeline definitions should 
clearly identify the type of exposure (e.g., committed exposures 
that have not been accepted by the borrower, commitments accepted 
but not closed, and funded and unfunded commitments that have closed 
but have not been distributed).
    <bullet> Guidelines for conducting periodic portfolio stress 
tests (including pipeline exposures) or sensitivity analyses to 
quantify the potential impact of changing economic/market conditions 
on asset quality, earnings, liquidity, and capital. The 
sophistication of stress-testing practices and sensitivity analysis 
should be consistent with the size, complexity, and risk 
characteristics of the leveraged loan portfolio. The leveraged 
portfolio also should be included in any enterprise-wide stress 
tests.
    <bullet> Total and segment leveraged finance exposures, 
including subordinated debt and equity holdings, alongside 
established limits. Reports should provide a detailed and 
comprehensive view of global exposure, including situations where 
institutions have indirect exposure to an obligor or are holding a 
previously sold position as collateral or as a reference asset in a 
derivative.
    <bullet> Borrower/counterparty leveraged finance reporting 
should consider exposures booked in other business units throughout 
the institution, including indirect exposure such as default swaps 
and total return swaps naming the distributed paper as a covered or 
reference asset or collateral exposure through repo transactions. 
Additionally, the institution should consider positions held in 
available for sale or traded portfolios or through structured 
investment vehicles owned or sponsored by the originating 
institution or its subsidiaries or affiliates.

Risk Rating Leveraged Loans

    The Agencies have previously issued guidance on rating credit 
exposures and credit rating systems, which applies to all credit 
transactions, including those in the leveraged lending category.\9\
---------------------------------------------------------------------------

    \9\ FRB SR 98-25 ``Sound Credit Risk Management and the Use of 
Internal Credit Risk Ratings at Large Banking Organizations;'' OCC 
Handbooks ``Rating Credit Risk'' and ``Leveraged Lending;'' FDIC 
Risk Management Manual of Examination Policies, ``Loan Appraisal and 
Classification.''
---------------------------------------------------------------------------

    Risk rating leveraged loans involves the use of realistic 
repayment assumptions to determine the borrower's ability to de-
lever to a sustainable level within a reasonable period of time. If 
the projected capacity to pay down debt from cash flow is nominal, 
with refinancing the only viable option, the credit will usually be 
criticized even if it has been recently underwritten. In cases where 
leveraged loan transactions have no reasonable or realistic 
prospects to de-lever, a substandard classification is likely. 
Furthermore, when assessing debt service capacity, extensions and 
restructures should be scrutinized to ensure that they are not 
merely masking repayment capacity problems.
    If the primary source of repayment becomes inadequate it would 
generally be inappropriate to consider enterprise value as a 
secondary source unless that value is well supported. Evidence of 
well-supported value may include binding purchase and sale 
agreements with qualified third parties or through valuations that 
fully consider the effect of the borrower's distressed circumstances 
and potential changes in business and market conditions. For such 
borrowers, when a portion of the loan may not be protected by 
pledged assets or a well-supported enterprise value, examiners 
generally will rate that portion doubtful or loss and place the loan 
on nonaccrual.

Other Key Risk Management Components

Credit Analysis

    Effective underwriting and management of leveraged finance risk 
is highly dependent on the quality of analysis employed during the 
approval process as well as ongoing monitoring. Policies should 
address the need for a comprehensive assessment of financial, 
business, industry, and management risks including, but not limited 
to, whether:
    <bullet> Cash flow analyses rely on overly optimistic or 
unsubstantiated projections of sales, margins, and merger and 
acquisition synergies.
    <bullet> Liquidity analyses include performance metrics 
appropriate for the borrower's industry, predictability of the 
borrower's cash flow, measurement of the borrower's operating cash 
needs, and ability to meet debt maturities.
    <bullet> Projections exhibit an adequate margin for 
unanticipated merger-related integration costs.
    <bullet> Projections are stress tested for several downside 
scenarios, including a covenant breach.
    <bullet> Transactions are reviewed at least quarterly to 
determine variance from plan, the risk implications thereof, and the 
accuracy of risk ratings and accrual status. From inception, the 
credit file should contain a chronological rationale for and 
analysis of all substantive changes to the borrower's operating plan 
and variance from expected financial performance.
    <bullet> Enterprise and collateral valuations are derived or 
validated independently of the origination function, are timely, and 
consider potential value erosion.
    <bullet> Collateral liquidation and asset sale estimates are 
conservative.
    <bullet> Potential collateral shortfalls are identified and 
factored into risk rating and accrual decisions.
    <bullet> Contingency plans anticipate changing conditions in 
debt or equity markets when exposures rely on refinancing or the 
issuance of new equity.
    <bullet> The borrower is adequately protected from interest rate 
and foreign exchange risk.

Problem Credit Management

    Financial institutions should formulate individual action plans 
when working with borrowers that are experiencing diminished 
operating cash flows, depreciated collateral values, or other 
significant variance to plan. Weak initial underwriting of 
transactions, coupled with poor structure and limited covenants, may 
make problem credit discussions and eventual restructurings more 
difficult for lenders as well as result in less favorable outcomes.
    Institutions should formulate credit policies that define 
expectations for the management of adversely rated and other high-
risk borrowers whose performance departs significantly from planned 
cash flows, asset sales, collateral values, or other important 
targets. These policies should stress the need for workout plans 
that contain

[[Page 19424]]

quantifiable objectives and measureable time frames. Actions may 
include working with the borrower for an orderly resolution while 
preserving the institution's interests, sale of the credit in the 
secondary market, or liquidation. Problem credits should be reviewed 
regularly for risk rating accuracy, accrual status, recognition of 
impairment through specific allocations, and charge-offs.

Deal Sponsors

    Institutions should develop guidelines for evaluating the 
qualifications of financial sponsors and implement a process to 
regularly monitor performance. Deal sponsors may provide valuable 
support to borrowers such as strategic planning, management, and 
other tangible and intangible benefits. Sponsors may also provide a 
source of financial support for a borrower that fails to achieve 
projections. Institutions generally rate borrowers based on their 
analysis of the borrowers' standalone financial condition. However, 
lending institutions may consider support from a sponsor in 
assigning an internal risk rating when the institution can document 
the sponsor's history of demonstrated support as well as the 
economic incentive, capacity, and stated intent to continue to 
support the transaction. However, even with documented capacity and 
a history of support, a sponsor's potential contributions may not 
mitigate examiner criticism absent a documented commitment of 
continued support. An evaluation of a sponsor's financial support 
should include the following:
    <bullet> Sponsor's historical performance in supporting its 
investments, financially and otherwise.
    <bullet> Sponsor's economic incentive to support, including the 
nature and amount of capital contributed at inception.
    <bullet> Documentation of degree of support (e.g., guarantee, 
comfort letter, verbal assurance).
    <bullet> Consideration of the sponsor's contractual investment 
limitations.
    <bullet> To the extent feasible, a periodic review of the 
sponsor's financial statements and trends, and an analysis of its 
liquidity, including the ability to fund multiple deals.
    <bullet> Consideration of the sponsor's dividend and capital 
contribution practices.
    <bullet> Likelihood of supporting the borrower compared to other 
deals in the sponsor's portfolio.
    <bullet> Guidelines for evaluating the qualifications of 
financial sponsors and a process to regularly monitor performance.

Credit Review

    Institutions should have a strong and independent credit review 
function with a demonstrated ability to identify portfolio risks and 
documented authority to escalate inappropriate risks and other 
findings to senior management. Due to the elevated risk inherent in 
leveraged finance, and depending on the relative size of an 
institution's leveraged finance business, it may be prudent for the 
institution's credit review function to examine the leveraged 
portfolio more frequently than other segments, go into greater 
depth, and be more selective in identifying personnel to assess the 
underlying transactions. Portfolio reviews should generally be 
conducted at least annually. For many institutions, the risk 
characteristics of the leveraged portfolio, such as high reliance on 
enterprise value, concentrations, adverse risk rating trends, or 
portfolio performance, may dictate more frequent reviews.
    Institutions should staff their internal credit review function 
appropriately and ensure that it has sufficient resources to ensure 
timely, independent, and accurate assessments of leveraged finance 
transactions. Reviews should evaluate the level of risk and risk 
rating integrity, valuation methodologies, and the quality of risk 
management. Internal credit reviews also should encompass a review 
of the institution's leveraged finance practices, policies and 
procedures to ensure that they are consistent with regulatory 
guidance.

Conflicts of Interest

    Institutions should develop appropriate policies to address and 
prevent potential conflicts of interest. For example, a lender may 
be reluctant to use an aggressive collection strategy with a problem 
borrower because of the potential impact on the value of the 
lender's equity interest. A lender may receive pressure to provide 
financial or other privileged client information that could benefit 
an affiliated equity investor. Such conflicts also may occur where 
the underwriting bank serves as financial advisor to the seller and 
simultaneously offers financing to multiple buyers (i.e., stapled 
financing). Similarly, there may be conflicting interests between 
the different lines of business or between the institution and its 
affiliates. These and other situations may arise that create 
conflicts of interest between the institution and its customers. 
Policies should clearly define potential conflicts of interest, 
identify appropriate risk management controls and procedures, enable 
employees to report potential conflicts of interest to management 
for action without fear of retribution, and ensure compliance with 
applicable law. Further, management should establish responsibility 
for training employees on how to avoid conflicts of interest, as 
well as provide for reporting, tracking, and resolution of any 
conflicts of interest that occur.

Anti-Tying Regulations

    Because leveraged finance transactions often involve a number of 
types of debt and several bank products, institutions should ensure 
that their policies incorporate safeguards to prevent violations of 
anti-tying regulations. Section 106(b) of the BHC Act Amendments of 
1970 prohibits certain forms of product tying by banks and their 
affiliates. The intent behind section 106(b) is to prevent 
institutions from using their market power over certain products to 
obtain an unfair competitive advantage in other products.

Reputational Risk

    Leveraged finance transactions are often syndicated through the 
bank and institutional markets. An institution's apparent failure to 
meet its legal or fiduciary responsibilities in underwriting and 
distributing transactions can damage its reputation and impair its 
ability to compete. Similarly, institutions distributing 
transactions that over time have significantly higher default or 
loss rates and performance issues may also see their reputation 
damaged in the markets.

Securities Laws

    Equity interests and certain debt instruments used in leveraged 
finance transactions may constitute ``securities'' for the purposes 
of federal securities laws. When securities are involved, 
institutions should ensure compliance with applicable securities 
laws, including disclosure and other regulatory requirements. 
Institutions should also establish procedures to appropriately 
manage the internal dissemination of material nonpublic information 
about transactions in which it plays a role.

Compliance Function

    The legal and regulatory issues raised by leveraged transactions 
are numerous and complex. To ensure that potential conflicts are 
avoided and laws and regulations are adhered to, an independent 
compliance function should periodically review an institution's 
leveraged finance activity. Additional information is available in 
the Agencies' existing guidance on compliance with laws and 
regulations.

Conclusion

    Leveraged finance is an important type of financing for the 
economy, and the banking industry plays an integral role in making 
credit available and syndicating that credit to investors. 
Institutions should ensure they do not heighten risks by originating 
poorly underwritten deals that find their way into a wide variety of 
investment instruments. Therefore, it is important this financing be 
provided to creditworthy borrowers in a safe and sound manner that 
is consistent with this guidance.

    Dated: March 19, 2012.
John Walsh,
Acting Comptroller of the Currency.

    By order of the Board of Governors of the Federal Reserve 
System, March 22, 2012.
Jennifer J. Johnson,
Secretary of the Board.
    Dated at Washington, DC, this 26th Day of March 2012.

    Federal Deposit Insurance Corporation.
Valerie J. Best,
Assistant Executive Secretary.
[FR Doc. 2012-7620 Filed 3-29-12; 8:45 am]
BILLING CODE 4810-33- 6210-01- 6714-01-P


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