9382 Federal Register / Vol. 62, No. 41 / Monday, March 3, 1997 / Proposed Rules

available for public inspection in the

Dairy Division during regular business

hours (7 CFR 1.27(b)).

Statement of Consideration

The proposed rule would continue to

suspend certain provisions of the

Central Arizona order for an indefinite

period beginning April 1, 1997. The

proposed suspension would continue to

remove the requirement that a

cooperative association which operates

a manufacturing plant in the marketing

area must ship at least 50 percent of its

milk supply during the current month

or the previous 12-month period ending

with the current month to other

handlers’ pool plants to maintain the

pool status of its manufacturing plant.

The order permits a cooperative

association’s manufacturing plant,

located in the marketing area, to be a

pool plant if at least 50 percent of the

producer milk of members of the

cooperative association is physically

received at pool plants of other handlers

during the current month or the

previous12-month period ending with

the current month.

Continuation of the current

suspension was requested by United

Dairymen of Arizona (UDA), a

cooperative association that represents

nearly all of the dairy farmers who

supply the Central Arizona market.

UDA contends that the continued pool

status of their manufacturing plant

would be threatened if the suspension is

not continued. UDA states that the same

marketing conditions that warranted the

suspension for the past two years still

exist. UDA maintains that members who

increased their milk production to meet

the projected demands of fluid handlers

for distribution into Mexico continue to

suffer the adverse impact of the collapse

of the Mexican peso. Absent a

suspension, UDA projects that costly

and inefficient movements of milk

would have to be made to maintain pool

status of producers who have

historically supplied the market and to

prevent disorderly marketing in the

Central Arizona marketing area.

Accordingly, it may be appropriate to

suspend the aforesaid provisions

beginning April 1, 1997, for an

indefinite period.

List of Subjects in 7 CFR Part 1131

Milk marketing orders.

The authority citation for 7 CFR Part

1131 continues to read as follows:

Authority: 7 U.S.C. 601–674.

Dated: February 24, 1997.

Richard M. McKee,

Director, Dairy Division.

[FR Doc. 97–5114 Filed 2–28–97; 8:45 am]

BILLING CODE 3410–02–P

Rural Utilities Service

7 CFR Part 1717

RIN 0572–AB26

Settlement of Debt Owed by Electric

Borrowers

AGENCY: Rural Utilities Service.

ACTION: Proposed rule.

SUMMARY: The Administrator of the

Rural Utilities Service (RUS) hereby

proposes to establish policies and

standards for the settlement of debts and

claims owed by rural electric borrowers.

In addition to proposing policies and

standards for debt settlement, the rule

proposes RUS policy on subsequent

loans to borrowers whose debt has been

restructured.

DATES: Written comments must be

received by RUS or carry a postmark or

equivalent by May 2, 1997.

ADDRESSES: Written comments should

be addressed to Monte Heppe, Jr.,

Director, Program Support and

Regulatory Analysis, U.S. Department of

Agriculture, Rural Utilities Service, Stop

1522, 1400 Independence Ave. SW.,

Washington, DC 20250–1522. RUS

requires, in hard copy, a signed original

and 3 copies of all comments (7 CFR

1700.30(e)). Comments will be available

for public inspection during regular

business hours (7 CFR 1.27(b)).

FOR FURTHER INFORMATION CONTACT: Mr.

Blaine D. Stockton, Jr., Assistant

Administrator—Electric, U.S.

Department of Agriculture, Rural

Utilities Service, Stop 1560, 1400

Independence Avenue, SW.,

Washington, DC 20250–1560.

Telephone: 202–720–9545.

SUPPLEMENTARY INFORMATION: This

regulatory action has been determined

to be significant for the purposes of

Executive Order 12866, Regulatory

Planning and Review, and therefore has

been reviewed by the Office of

Management and Budget (OMB). The

Administrator of the Rural Utilities

Service (RUS) has determined that a

rule relating to the RUS electric loan

program is not a rule as defined in the

Regulatory Flexibility Act (5 U.S.C. 601

et seq.), and, therefore, the Regulatory

Flexibility Act does not apply to this

proposed rule. The Administrator of

RUS has determined that this rule will

not significantly affect the quality of the

human environment as defined by the

National Environmental Policy Act of

1969 (42 U.S.C. 4321 et seq.). Therefore,

this action does not require an

environmental impact statement or

assessment. This proposed rule is

excluded from the scope of Executive

Order 12372, Intergovernmental

Consultation, which may require

consultation with State and local

officials. A Notice of Final Rule titled

Department Programs and Activities

Excluded from Executive Order 12372

(50 FR 47034) exempts RUS electric

loans and loan guarantees from coverage

under this Order. This proposed rule

has been reviewed under Executive

Order 12988, Civil Justice Reform. RUS

has determined that this proposed rule

meets the applicable standards provided

in Sec. 3 of the Executive Order.

The program described by this rule is

listed in the Catalog of Federal Domestic

Assistance Programs under number

10.850 Rural Electrification Loans and

Loan Guarantees. This catalog is

available on a subscription basis from

the Superintendent of Documents, the

United States Government Printing

Office, Washington, DC 20402–9325.

Background

On April 4, 1996, P.L. 104–127

amended section 331(b) of the

Consolidated Farm and Rural

Development Act (Con Act) to extend to

RUS loans and loan guarantees the

Secretary of Agriculture’s authority to

compromise, adjust, reduce, or chargeoff debts or claims owed to the

government (collectively, debt

settlement). The amendment also

extended to the security instruments,

leases, contracts, and agreements

administered by RUS, the Secretary’s

authority to adjust, modify, subordinate,

or release the terms of those documents.

The Secretary of Agriculture, in 7 CFR

2.47, has delegated authority under

section 331(b) to the Administrator of

RUS, with respect to loans made or

guaranteed by RUS.

This proposed regulation proposes the

policies, standards, and procedures the

Administrator would use in settling

(restructuring) debts and claims owed

by rural electric borrowers.

Section 1717.1202 General Policy

This section proposes general policies

for settling debts and claims. Four

general policies are proposed:

1. Wherever possible, all debt and

claims will be collected in full in

accordance with its terms.

2. The rule by itself contains nothing

that modifies or forgives debt or claims

owed by a borrower. Any debt
Federal Register / Vol. 62, No. 41 / Monday, March 3, 1997 / Proposed Rules 9383

settlement will require the explicit

written approval of the Administrator.

3. The Administrator’s authority to

settle debts and claims will apply to

cases where a borrower is unable to pay

its debts and claims in accordance with

their terms, and where settlement will

maximize the recovery of debts and

claims owed to the government.

4. The Administrator will consider

several factors in structuring debt

settlements and determining the amount

of debt recovery that is possible. Among

those factors are the Rural

Electrification Act of 1936, the National

Energy Policy Act of 1992, the policies

and regulations of the Federal Energy

Regulatory Commission (FERC), and

other market and nonmarket forces that

affect competition in the electric utility

industry and, in particular, the rural

electric segment of the industry.

Section 1717.1203 Relationship

Between RUS and Department of Justice

The Administrator is required to

notify the Attorney General whenever

the Administrator intends to use his or

her settlement authority. The Attorney

General retains the authority under

existing law to settle debts and claims

against a borrower that is in bankruptcy

or is otherwise involved in litigation

with the government. In addition, any

debt or claim that has been referred in

writing to the Attorney General would

not be settled under the Administrator’s

own authority.

Section 1717.1204 Policies and

Conditions Applicable to Settlements

This section proposes specific

policies, standards, and conditions

applicable to debt settlements. These are

in addition to the general principles

proposed in § 1717.1202. The specific

policies, standards, and conditions

include the following:

• Documentation, analyses, and other

actions would be required of the

borrower to demonstrate that it is

unable to pay its debts or claims in

accordance with their terms, or that it

will be unable to meet such obligations

sometime within the 24 months

following the borrower’s application for

relief, and that such default is likely to

continue beyond the 24-month period.

• RUS could contract with an

independent consultant of its choice to

provide an analysis of the efficiency and

effectiveness of the borrower’s

organization and operations, and those

of its member systems in the case of a

power supply borrower. The borrower

(and its member systems in the case of

a power supply borrower) could be

required to share in the costs of the

consultant. The scope of work of the

independent consultant, reporting

relationships, and the consultant’s

access to the borrower’s records and

staff are spelled out in § 1717.1204(b)(3).

• Debt settlement measures that could

be used under proposed § 1717.1204

would include, but not be limited to,

reamortization of debt; extension of debt

maturity; reduction in the interest rate

charged; forgiveness of interest accrued,

penalties, and the government’s cost of

collection; and with the concurrence of

the Under Secretary for Rural

Development, forgiveness of loan

principal. They would also include

restructuring a borrower’s obligations

under a loan guaranteed by RUS, by

RUS acquiring and restructuring the

guaranteed loan, by restructuring the

loan guarantee obligation and/or the

borrower’s reimbursement obligations,

or by other means, subject to any

consents or approvals required by the

third party lenders.

• The borrower or the independent

consultant could be required to solicit

competitive bids for the borrower’s

system. The Administrator could use

the competitive bids received as a basis

for requiring the sale of all or part of the

borrower’s system as a condition of

settlement of the borrower’s debt. The

Administrator could also consider the

bids in evaluating alternative settlement

measures.

• The Administrator would not grant

debt relief unless similar relief, on a pro

rata basis, is granted by other secured

creditors of the borrower, or they

provide other benefits or value to the

restructuring. Unsecured creditors

would also be expected to contribute to

the restructuring. If it is not possible to

obtain the expected contributions from

other creditors, the Administrator could

proceed to settle a borrower’s debt if

that would maximize recovery by the

government and would not result in

material benefits accruing to other

creditors at the expense of the

government.

• The Administrator could consider

several methods for determining the

value of a borrower’s assets. In no case

would the Administrator settle a debt or

claim for less than the value (after

considering collection costs) of the

borrower’s system and other collateral

securing the debt or claim. In the case

of a power supply borrower, the value

of the wholesale power contracts

between the borrower and its member

systems would be considered. The

valuation of the wholesale power

contracts would take into account,

among other matters, the rights of the

government, and/or third parties, to

assume the rights and obligations of the

borrower under such contracts, to

charge reasonable rates for service

provided under the contracts, and to

otherwise enforce the contracts in

accordance with their terms.

• The Administrator would consider

the rates charged for electric service by

the borrower and, in the case of a power

supply borrower, by its members, taking

into account, among other factors, the

practices of the Federal Energy

Regulatory Commission (FERC), as

adapted to the cooperative structure of

borrowers, and, where applicable, FERC

treatment of any investments by coowners in projects jointly owned by the

borrower.

• The Administrator would consider

whether a settlement is favorable to the

government in comparison with what

can be recovered by enforced collection

procedures.

• Before any settlement is approved,

the borrower would be required to

obtain all approvals required of

regulatory bodies that are needed for the

borrower to fulfill its obligations under

the settlement.

• As a condition of debt settlement,

the borrower, and in the case of a power

supply borrower, its members, would be

required to implement changes in

management, operations, and

performance if requested by the

Administrator. The borrower could be

required to undertake a corporate

restructuring and/or sell a portion of its

plant, facilities, or other assets. The

borrower could also be required to

replace senior management and/or hire

outside experts acceptable to the

Administrator. This could include a

commitment by the borrower’s board of

directors to restructure and/or obtain

new members on the board. The

borrower could be required to accept

controls on general funds, as well as on

any investments, loans or guarantees,

notwithstanding any limitations on

RUS’ control rights in the borrower’s

loan documents or RUS regulations.

Certain actions could also be required of

the borrower to perfect and protect the

government’s lien on cash deposits,

securities, and other assets. In the case

of a power supply borrower, the

borrower could be required to obtain

credit support as well as pledges and

action plans from its members regarding

changes in operations, management, and

organizational structure to reduce the

member’s operating costs, improve their

efficiency, and/or expand their markets

and revenues.

• As a condition of debt settlement, a

borrower could be required to convey

some or all of its assets to the

government.

• Finally, RUS will require that the

borrower warrant and agree that no
9384 Federal Register / Vol. 62, No. 41 / Monday, March 3, 1997 / Proposed Rules

bonuses or similar extraordinary

compensation has been or will be

provided, for reasons related to the

settlement of government debt, to any

officer or employee of the borrower or

to other persons or entities identified by

RUS. RUS may impose such other terms

and conditions of debt settlement as

RUS deems to be in the government’s

interests.

Section 1717.1205 Waiver of Existing

Conditions on Borrowers

This section would allow the

Administrator to waive or otherwise

reduce conditions and requirements

imposed on a borrower by its loan

documents if the Administrator

determines that that would enhance the

recovery of debt by the government.

Such waivers and reductions might

include a variety of actions, but could

not include the debt settlement

measures proposed in paragraph (c) of

§ 1717.1204, which would be subject to

all of the requirements of § 1717.1204.

Section 1717.1206 Loans Subsequent

to Settlement

Under this section, in considering any

loan request subsequent to a debt

settlement, the Administrator would

presume that credit support for the full

amount of the requested loan is needed.

The credit support could be in a number

of forms, provided that they are

acceptable to the Administrator.

Section 1717.1207 RUS Obligations

Under Loan Guarantees

This section would clarify that RUS’

obligations under loan guarantee

commitments to the Federal Financing

Bank (FFB) and other lenders are not

affected by the proposed rule. For

example, if RUS settles a guaranteed

loan of the FFB, RUS’ obligation under

its guarantee to the FFB to make up any

shortfall in payments on that loan

would remain in force.

Section 1717.1208 Government’s

Rights Under Loan Documents

This section would clarify that the

proposed rule does not limit, modify, or

otherwise affect the rights of the

government under the loan documents

executed with borrowers, or under law

or equity.

Information Collection and

Recordkeeping Requirements

In accordance with the Paperwork

Reduction Act of 1995 (44 U.S.C.

Chapter 35, as amended) RUS is

requesting comments on the information

collection incorporated in this proposed

rule.

Comment on this information

collection must be received by May 2,

1997.

Comments are invited on: (a) Whether

the proposed collection of information

is necessary for the proper performance

of the functions of the agency, including

whether the information will have

practical utility; (b) The accuracy of the

agency’s estimate of the burden of the

proposed collection of information; (c)

Ways to enhance the quality, utility and

clarity of the information to be

collected; and (d) Ways to minimize the

burden of the collection of information

on respondents, including through the

use of automated collection techniques

or other forms of information

technology.

FOR FURTHER INFORMATION CONTACT:

Dawn Wolfgang, Program Support and

Regulatory Analysis, U.S. Department of

Agriculture, Rural Utilities Service, Ag

Box 1522, 1400 Independence Avenue,

SW., Washington, DC 20250–1522.

Telephone: 202–720–0812. FAX: 202–

720–4120. E-mail:

dwolfgan@rus.usda.gov.

Title: 7 CFR 1717 subpart Y,

Settlement of Debt Owed by Electric

Borrowers.

Type of request: New information

collection.

Abstract: The information collection

required by this proposed rule stems

from passage of Pub. L. 104–127, which

amended section 331(b) of the

Consolidated Farm and Rural

Development Act (7 U.S.C. 1921 et seq.)

to extend to RUS loans and loan

guarantees the Secretary of Agriculture’s

authority to settle debts. Only those

electric borrowers that are unable to

fully repay their debts to the

government and who apply to RUS for

relief will be affected by this proposed

information collection.

The proposed collection will require

only that information which is essential

for determining the need for debt

settlement, the amount of debt the

borrower can repay, the future

scheduling of debt repayment, and the

range of opportunities for enhancing the

amount of debt that can be recovered.

The information to be collected will be

similar to that which any prudent

lender would require to determine

whether debt settlement is required and

the amount of relief that is needed.

Since the need for relief is expected to

vary substantially from case to case, so

will the required information collection.

Estimate of burden: Public reporting

burden for this collection of information

is estimated to average 3,000 hours per

response.

Respondents: Businesses, including

not for profit cooperatives and others.

Estimated number of respondents

each year: 2.

Estimated number of responses per

respondent: 1.

Estimated total annual burden on

respondents: 6,000 hours.

Copies of this information collection

can be obtained from Dawn Wolfgang,

Program Support and Regulatory

Analysis, Rural Utilities Service. Phone:

202–720–0812.

Send comments regarding this

information collection requirement to

the Office of Information and Regulatory

Affairs, Office of Management and

Budget, ATTN: Desk Officer, USDA,

Room 10102 New Executive Office

Building, Washington, DC 20503, and to

Dawn Wolfgang, Program Support and

Regulatory Analysis, U.S. Department of

Agriculture, Rural Utilities Service,

1400 Independence Ave, SW, Ag Box

1522, Washington, DC 20250–1522.

Comments are best assured of

receiving fullest consideration if OMB

receives them within 30 days of

publication in the Federal Register.

All comments will become a matter of

public record.

List of Subjects in 7 CFR Part 1717

Administrative practice and

procedure, Claims, Electric power,

Electric utilities, Intergovernmental

relations, Investments, Lien

accommodation, Lien subordination,

Loan programs—energy, Reporting and

recordkeeping requirements, Rural

areas.

For reasons explained in the

preamble, RUS proposes to amend 7

CFR chapter XVII by amending part

1717 as follows:

PART 1717—POST-LOAN POLICIES

AND PROCEDURES COMMON TO

INSURED AND GUARANTEED

ELECTRIC LOANS

1. The authority citation for part 1717

is revised to read as follows:

Authority: 7 U.S.C. 901–950b, 1981; Pub.

L. 99–591, 100 Stat. 3341–16; Pub. L. 103–

354, 108 Stat. 3178 (7 U.S.C. 6941 et seq.),

unless otherwise noted.

2. Subparts T through X are added

and reserved and subpart Y is added to

read as follows:

Subpart T—[Reserved]

Sec.

1717.950—1717.999 [Reserved]

Subpart U—[Reserved]

Sec.

1717.1000—1717.1049 [Reserved]
Federal Register / Vol. 62, No. 41 / Monday, March 3, 1997 / Proposed Rules 9385

Subpart V—[Reserved]

Sec.

1717.1050—1717.1099 [Reserved]

Subpart W—[Reserved]

Sec.

1717.1100—1717.1149 [Reserved]

Subpart X—[Reserved]

Sec.

1717.1150—1717.1199 [Reserved]

Subpart Y—Settlement of Debt

Sec.

1717.1200 Purpose and scope.

1717.1201 Definitions.

1717.1202 General policy.

1717.1203 Relationship between RUS and

Department of Justice.

1717.1204 Policies and conditions

applicable to settlements.

1717.1205 Waiver of existing conditions on

borrowers.

1717.1206 Loans subsequent to settlement.

1717.1207 RUS obligations under loan

guarantees.

1717.1208 Government’s rights under loan

documents.

Subpart T—[Reserved]

§§ 1717.950—1717.999 [Reserved]

Subpart U—[Reserved]

§§ 1717.1000—1717.1049 [Reserved]

Subpart V—[Reserved]

§§ 1717.1050—1717.1099 [Reserved]

Subpart W—[Reserved]

§§ 1717.1100—1717.1149 [Reserved]

Subpart X—[Reserved]

§§ 1717.1150—1717.1199 [Reserved]

Subpart Y—Settlement of Debt

§ 1717.1200 Purpose and scope.

(a) Section 331(b) of the Consolidated

Farm and Rural Development Act (Con

Act), as amended on April 4, 1996 by

Public Law 104–127 (7 U.S.C. 1981),

grants authority to the Secretary of

Agriculture to compromise, adjust,

reduce, or charge-off debts or claims

arising from loans made or guaranteed

under the Rural Electrification Act of

1936, as amended (RE Act). Section

331(b) of the Con Act also authorizes the

Secretary of Agriculture to adjust,

modify, subordinate, or release the

terms of security instruments, leases,

contracts, and agreements entered into

or administered by the Rural Utilities

Service (RUS). The Secretary, in 7 CFR

2.47, has delegated authority under

section 331(b) of the Con Act to the

Administrator of the RUS, with respect

to loans made or guaranteed by RUS.

(b) This subpart sets forth the policy

and standards of the Administrator of

RUS with respect to the settlement of

debts and claims arising from loans

made or guaranteed to rural electric

borrowers under the RE Act. Nothing in

this subpart limits the Administrator’s

authority under section 12 of the RE

Act.

§ 1717.1201 Definitions.

Terms used in this subpart that are

not defined in this section have the

meanings set forth in 7 CFR part 1710.

In addition, for the purposes of this

subpart:

Attorney General means the Attorney

General of the United States of America.

Claim means any claim of the

government arising from loans made or

guaranteed under the RE Act.

Con Act means the Consolidated Farm

and Rural Development Act (7 U.S.C.

1921 et seq.).

Debt means outstanding debt of a

rural electric borrower (including

principal, accrued interest, penalties,

and the government’s costs of debt

collection) owed to the government and

arising from loans made or guaranteed

under the RE Act.

Enforced collection procedures means

any procedures available to the

Administrator for the collection of debt

that are authorized by law, in equity, or

under the borrower’s loan documents or

other agreements with RUS.

Loan documents means the mortgage

(or other security instrument acceptable

to RUS), the loan contract, and the

promissory note entered into between

the borrower and RUS.

RE Act means the Rural Electrification

Act of 1936, as amended (7 U.S.C. 901–

950b).

Restructure means to settle a debt or

claim.

Settle means to reamortize, adjust,

compromise, reduce, or charge-off debt

or claims owed to the government by

rural electric borrowers.

§ 1717.1202 General policy.

(a) It is the policy of the

Administrator that, wherever possible,

all debt owed shall be collected in full

in accordance with the terms of the

borrower’s loan documents.

(b) Nothing in this subpart by itself

modifies, reduces, waives, or eliminates

any obligation of a borrower under its

loan documents. Any such

modifications regarding the debt owed

by a borrower may be granted under the

authority of the Administrator only by

means of the explicit written approval

of the Administrator in each case.

(c) The Administrator’s authority to

settle debts and claims will apply to

cases where a borrower is unable to pay

its debts and claims in accordance with

their terms, and where settlement will

maximize the recovery of debts and

claims owed to the government.

(d) In structuring settlements and

determining the amount of debt

recovery that is possible, the

Administrator will consider, among

other factors, the RE Act, the National

Energy Policy Act of 1992 (Public Law

102–486, 106 Stat. 2776), the policies

and regulations of the Federal Energy

Regulatory Commission, and other

market and nonmarket forces as to their

effects on competition in the electric

utility industry and on rural electric

systems in particular.

§ 1717.1203 Relationship between RUS

and Department of Justice.

(a) The Attorney General will be

notified by the Administrator whenever

the Administrator intends to use his or

her authority under section 331(b) of the

Con Act to settle a debt or claim.

(b) If a claim has been referred in

writing to the Attorney General, the

Administrator will not use his or her

own authority to settle the claim.

§ 1717.1204 Policies and conditions

applicable to settlements.

(a) General. Settlement of debts and

claims shall be subject to the policies,

requirements, and conditions set forth

in this section and in § 1717.1202.

(b) Need for debt settlement. (1) The

Administrator will not settle any debt or

claim unless the Administrator has

determined that the borrower is unable

to meet its financial obligations under

its loan documents according to the

terms of those documents, or that the

borrower will not be able to meet said

obligations sometime within the period

of 24 months following the borrower’s

application for relief, and such default

is likely to continue beyond the 24

month period. The determination of a

borrower’s ability to meet its financial

obligations will be based on analyses

and documentation by RUS of the

borrower’s historical, current, and

projected costs, revenues, cash flows,

assets, and other factors that may be

relevant on a case by case basis.

(2) The borrower must provide to

RUS, in form and substance satisfactory

to RUS, an in-depth analysis supporting

the borrower’s contention that it is

unable or will not be able to meet its

financial obligations as described in

paragraph (b)(1) of this section. The

analysis must include:
9386 Federal Register / Vol. 62, No. 41 / Monday, March 3, 1997 / Proposed Rules

(i) An explanation and analysis of the

causes of the borrower’s inability to

meet its financial obligations;

(ii) A thorough review and analysis of

the opportunities available or

potentially available to the borrower to

reduce administrative overhead and

other costs, improve efficiency and

effectiveness, and expand markets and

revenues, including but not limited to

opportunities for sharing services,

merging, and/or consolidating. In the

case of a power supply borrower, the

study shall include such opportunities

among the members of the borrower;

(iii) Documentation of the actions

taken, in progress, or planned by the

borrower (and its member systems, if

applicable) to take advantage of the

opportunities cited in paragraph

(b)(2)(ii) of this section; and

(iv) Other analyses and

documentation prescribed by RUS on a

case by case basis.

(3) RUS may require that an

independent consultant provide an

analysis of the efficiency and

effectiveness of the borrower’s

organization and operations, and those

of its member systems in the case of a

power supply borrower. The following

conditions will apply:

(i) RUS will select the independent

consultant taking into account, among

other matters, the consultant’s

experience and expertise in matters

relating to electric utility operations,

finance, and restructuring;

(ii) The contract with the consultant

shall be to provide services to RUS on

such terms and conditions as RUS

deems appropriate. The consultant’s

scope of work may include, but shall

not be limited to, an analysis of the

following:

(A) How to maximize the value of the

government’s collateral, such as through

mergers, consolidations, or sales of all

or part of the collateral;

(B) The viability of the borrower’s

system, taking into account such matters

as system size, service territory and

markets, asset base, physical condition

of the plant, operating efficiency,

competitive pressures, industry trends,

and opportunities to expand markets

and improve efficiency and

effectiveness;

(C) The feasibility and the potential

benefits and risks to the borrower and

the government of corporate

restructuring, including aggregation and

disaggregation;

(D) In the case of a power supply

borrower, the retail rate mark-up by

member systems and the potential

benefits to be achieved by member

restructuring through mergers,

consolidations, shared services, and

other alliances;

(E) The quality of the borrower’s

management, management advisors,

consultants, and staff;

(F) Opportunities for reducing

overhead and other costs, for realizing

economies through marketing, and for

improving the borrower’s existing and

prospective contractual arrangements

for the purchase and sale of power and

the operation of plant and facilities; and

(G) The accuracy and completeness of

the borrower’s analysis provided under

paragraph (b)(2) of this section;

(iii) RUS and, as appropriate, other

creditors, will determine the extent to

which the borrower and third parties

(including the members of a power

supply borrower) will be required to

participate in funding the costs of the

independent consultant;

(iv) The borrower will be required to

make available to the consultant all

corporate documents, files, and records,

and to provide the consultant with

access to key employees. The borrower

will also normally be required to

provide the consultant with office space

convenient to the borrower’s operations

and records; and

(v) All analyses, studies, opinions,

memoranda, and other documents and

information produced by the

independent consultant shall be

provided to RUS on a confidential basis

for consideration in evaluating the

borrower’s application for debt

settlement. Such documents and

information may be made available to

the borrower and other appropriate

parties if authorized in writing by RUS.

(4) The borrower may be required to

employ a temporary or permanent

manager acceptable to the

Administrator, to manage the borrower’s

operations to ensure that all actions are

taken to avoid or minimize the need for

debt settlement. The employment could

be on a temporary basis to manage the

system during the time the debt

settlement is being considered, and

possibly for some time after any debt

settlement, or it could be on a

permanent basis.

(c) Debt settlement measures. (1) If the

Administrator determines that debt

settlement is appropriate, the debt

settlement measures the Administrator

will consider under this subpart with

respect to direct, insured, or guaranteed

loans include, but are not limited to, the

following:

(i) Reamortization of debt;

(ii) Extension of debt maturity,

provided that the weighted average life

of the restructured debt shall not exceed

the weighted average of the expected

remaining useful lives of the assets

pledged as security for said debt;

(iii) Reduction of the interest rate

charged on the borrower’s debt,

provided that the interest rate on any

portion of the restructured debt shall

not be reduced to less than 5 percent;

(iv) Forgiveness of interest accrued,

penalties, and costs incurred by the

government to collect the debt; and

(v) With the concurrence of the Under

Secretary for Rural Development,

forgiveness of loan principal.

(2) In the event that RUS has, under

section 306 of the RE Act, guaranteed

loans made by the Federal Financing

Bank or other third parties, the

Administrator may restructure the

borrower’s obligations by acquiring and

restructuring the guaranteed loan, by

restructuring the loan guarantee

obligation, by restructuring the

borrower’s reimbursement obligations,

or by such means as the Administrator

deems appropriate, subject to such

consents and approvals, if any, that may

be required by the third party lender.

(d) Debt owed by other creditors. The

Administrator will not grant relief on

debt owed to the government unless

similar relief, on a pro rata basis, is

granted with respect to other secured

debt owed by the borrower, or the other

secured creditors provide other benefits

or value to the debt restructuring.

Unsecured creditors will also be

expected to contribute to the

restructuring. If it is not possible to

obtain the expected contributions from

other creditors, the Administrator may

proceed to settle a borrower’s debt if

that will maximize recovery by the

government and will not result in

material benefits accruing to other

creditors at the expense of the

government.

(e) Competitive bids for system assets.

If requested by RUS, the borrower or the

independent consultant provided for in

paragraph (b)(3) of this section shall

solicit competitive bids from potential

buyers of the borrower’s system or parts

thereof. The bidding process must be

conducted in consultation with RUS

and use standards and procedures

acceptable to RUS. The Administrator

may use the competitive bids received

as a basis for requiring the sale of all or

part of the borrower’s system as a

condition of settlement of the

borrower’s debt. The Administrator may

also consider the bids in evaluating

alternative settlement measures.

(f) Valuation of system. (1) The

Administrator will consider the value of

the borrower’s system, including, in the

case of a power supply borrower, the

wholesale power contracts between the

borrower and its member systems. The
Federal Register / Vol. 62, No. 41 / Monday, March 3, 1997 / Proposed Rules 9387

valuation of the wholesale power

contracts shall take into account, among

other matters, the rights of the

government, and/or third parties, to

assume the rights and obligations of the

borrower under such contracts, to

charge reasonable rates for service

provided under the contracts, and to

otherwise enforce the contracts in

accordance with their terms. In no case

will the Administrator settle a debt or

claim for less than the value (after

considering collection costs) of the

borrower’s system and other collateral

securing the debt or claim.

(2) RUS may use such methods,

analyses, and assessments as the

Administrator deems appropriate to

determine the value of the borrower’s

system.

(g) Rates. The Administrator will

consider the rates charged for electric

service by the borrower and, in the case

of a power supply borrower, by its

members, taking into account, among

other factors, the practices of the

Federal Energy Regulatory Commission

(FERC), as adapted to the cooperative

structure of borrowers, and, where

applicable, FERC treatment of any

investments by co-owners in projects

jointly owned by the borrower.

(h) Collection action. The

Administrator will consider whether a

settlement is favorable to the

government in comparison with the

amount that can be recovered by

enforced collection procedures.

(i) Regulatory approvals. Before the

Administrator will approve a

settlement, the borrower must provide

satisfactory evidence that it has

obtained all approvals required of

regulatory bodies that are needed to

implement rates or other provisions of

the settlement, or that are needed in any

other way for the borrower to fulfill its

obligations under the settlement.

(j) Conditions regarding management

and operations. As a condition of debt

settlement, the borrower, and in the case

of a power supply borrower, its

members, will be required to implement

those changes in structure, management,

operations, and performance deemed

necessary by the Administrator. Those

changes may include, but are not

limited to, the following:

(1) The borrower may be required to

undertake a corporate restructuring and/

or sell a portion of its plant, facilities,

or other assets;

(2) The borrower may be required to

replace senior management and/or hire

outside experts acceptable to the

Administrator. Such changes may

include a commitment by the borrower’s

board of directors to restructure and/or

obtain new membership to improve

board oversight and leadership;

(3) The borrower may be required to

agree to:

(i) Controls by RUS on the general

funds of the borrower, as well as on any

investments, loans or guarantees by the

borrower, notwithstanding any

limitations on RUS’ control rights in the

borrower’s loan documents or RUS

regulations; and

(ii) Requirements deemed necessary

by RUS to perfect and protect its lien on

cash deposits, securities, equipment,

vehicles, and other items of real or nonreal property; and

(4) In the case of a power supply

borrower, the borrower may be required

to obtain credit support from its member

systems, as well as pledges and action

plans by the members to change their

operations, management, and

organizational structure (e.g., shared

services, mergers, or consolidations) in

order to reduce operating costs, improve

efficiency, and/or expand markets and

revenues.

(k) Conveyance of assets. As a

condition of a settlement, a borrower

may be required to convey some or all

its assets to the government.

(l) Additional conditions. The

borrower will be required to warrant

and agree that no bonuses or similar

extraordinary compensation has been or

will be provided, for reasons related to

the settlement of government debt, to

any officer or employee of the borrower

or to other persons or entities identified

by RUS. The Administrator may impose

such other terms and conditions of debt

settlement as the Administrator

determines to be in the government’s

interests.

§ 1717.1205 Waiver of existing conditions

on borrowers.

Pursuant to section 331(b) of the Con

Act, the Administrator, at his or her sole

discretion, may waive or otherwise

reduce conditions and requirements

imposed on a borrower by its loan

documents if the Administrator

determines that such action will

contribute to enhancement of the

government’s recovery of debt. Such

waivers or reductions in conditions and

requirements under this section shall

not include the exercise of any of the

debt settlement measures set forth in

§ 1717.1204(c), which are subject to all

of the requirements of § 1717.1204.

§ 1717.1206 Loans subsequent to

settlement.

In considering any future loan

requests from a borrower whose debt

has been restructured (settled), it will be

presumed that credit support for the full

amount of the requested loan will be

required. Such support may be in a

number of forms, provided that they are

acceptable to the Administrator on a

case by case basis. They may include,

but need not be limited to, equity

infusions and guarantees of debt

repayment, either from the applicant’s

members (in the case of a power supply

borrower), or from a third party.

§ 1717.1207 RUS obligations under loan

guarantees.

Nothing in this subpart affects the

obligations of RUS under loan guarantee

commitments it has made to the Federal

Financing Bank or other lenders.

§ 1717.1208 Government’s rights under

loan documents.

Nothing in this subpart limits,

modifies, or otherwise affects the rights

of the government under loan

documents executed with borrowers, or

under law or equity.

Dated: February 24, 1997.

Jill Long Thompson,

Under Secretary, Rural Development.

[FR Doc. 97–5137 Filed 2–28–97; 8:45 am]

BILLING CODE 3410–15–P

Animal and Plant Health Inspection

Service

9 CFR Parts 92 and 130

[Docket No. 95–057–2]

Importation of Pet Birds

AGENCY: Animal and Plant Health

Inspection Service, USDA.

ACTION: Proposed rule; withdrawal.

SUMMARY: We are withdrawing a

proposed rule that would have made

several changes to the regulations for

importing pet birds into the United

States. We are withdrawing the

proposed rule after considering the

comments we received following the

publication of the proposed rule.

FOR FURTHER INFORMATION CONTACT: Dr.

Tracye R. Butler, Staff Veterinarian,

Import-Export Animals, National Center

for Import-Export, VS, APHIS, 4700

River Road Unit 39, Riverdale, MD

20737–1231, (301) 734–5097.

SUPPLEMENTARY INFORMATION:

Background

On August 21, 1996, we published in

the Federal Register (61 FR 43188–

43193, Docket No. 95–057–1) a proposal

to amend the regulations in 9 CFR part

92 by removing the requirement for

veterinary inspection at the port of entry

for all pet birds imported from Canada,

including pet birds of U.S. origin that