II

103D CONGRESS

2D SESSION S. 2061

To amend the Small Business Investment Act of 1958 to permit prepayment

of debentures issued by State and local development companies.

IN THE SENATE OF THE UNITED STATES

MAY 3 (legislative day, MAY 2), 1994

Mr. BUMPERS (for himself and Mr. HATFIELD) (by request) introduced the

following bill; which was read twice and referred to the Committee on

Small Business

A BILL

To amend the Small Business Investment Act of 1958 to

permit prepayment of debentures issued by State and

local development companies.

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

3 SECTION 1. PREPAYMENT OF DEVELOPMENT COMPANY

4 0DEBENTURES.

5 (a) IN GENERAL.—Title V of the Small Business In6 vestment Act of 1958 (15 U.S.C. 695, et seq.) is amended

7 by adding at the end the following new section:
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S 2061 IS

1 ‘‘SEC. 507. PREPAYMENT OF DEVELOPMENT COMPANY

2 DEBENTURES.

3 ‘‘(a) IN GENERAL.—(1) If the requirements of sub4 section (b) are met and subject to the availability of appro5 priations, the issuer of a debenture purchased by the Fed6 eral Financing Bank and guaranteed by the Administra7 tion under section 503 may, at the election of the borrower

8 whose loan secures such debenture and with the approval

9 of the Administration, prepay such debenture by paying

10 to the Federal Financing Bank the amount that is equal

11 to the sum of the unpaid principal balance due on the de12 benture on the date of the prepayment (plus accrued inter13 est at the coupon rate on the debenture) and the amount

14 of the repurchase premium described in paragraph (2)(A).

15 The Administration shall pay to the Federal Financing

16 Bank the difference between the repurchase premium paid

17 by the issuer of the debenture under this subsection and

18 the repurchase premium that the Federal Financing Bank

19 would otherwise have received.

20 ‘‘(2)(A) The amount of the repurchase premium de21 scribed in this paragraph is the product of—

22 ‘‘(i) the unpaid principal balance due on the de23 benture on the date of prepayment;

24 ‘‘(ii) the interest rate of the debenture; and

25 ‘‘(iii) the factor ‘P’, as determined under sub26 paragraph (B).
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1 ‘‘(B) for purposes of subparagraph (A)(iii), the factor

2 ‘P’ means the applicable percent determined in accordance

3 with the following table:

‘‘Year in which prepayment of debenture is

made (from date of original issuance)

Applicable percent

10-year

term loan

15-year

term loan

20-year

term loan

25-year

term loan

1 ..................................................... 1.00 1.00 1.00 1.00

2 ..................................................... .80 .85 .90 .92

3 ..................................................... .60 .70 .80 .84

4 ..................................................... .40 .55 .70 .76

5 ..................................................... .20 .40 .60 .68

6 ..................................................... 0 .25 .50 .60

7 ..................................................... 0 .10 .40 .52

8 ..................................................... 0 0 .30 .44

9 ..................................................... 0 0 .20 .36

10 ................................................... 0 0 .10 .28

11 ................................................... 0 0 0 .20

12 ................................................... 0 0 0 .12

13 ................................................... 0 0 0 .04

14 through 25 ................................ 0 0 0 0

4 ‘‘(b) REQUIREMENTS.—The requirements of this sub5 section are met if—

6 ‘‘(1) the debenture is outstanding and neither

7 the loan that secures the debenture nor the deben8 ture is in default on the date the prepayment is

9 made;

10 ‘‘(2) State or personal funds, which may include

11 refinancing under the programs authorized by sec12 tions 504 and 505 of this Act, are used to prepay

13 the debenture; and

14 ‘‘(3) the issuer certifies that the benefits, net of

15 fees and expenses authorized herein, associated with
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1 prepayment of the debenture are entirely passed

2 through to the borrower.

3 ‘‘(c) No fees or penalties other than those specified

4 in this section may be imposed as a condition of such pre5 payment against the issuer or the borrower, or the Admin6 istration or any fund or account administered by the Ad7 ministration, except as provided in this Act.

8 ‘‘(d) The refinancing of debentures authorized by

9 paragraph (b)(2) of this section under section 504 of this

10 Act shall be limited to only such amounts as are needed

11 to prepay existing debentures and shall be subject to all

12 of the other provisions of sections 504 and 505 of this

13 Act and the rules and regulations of the Administration

14 promulgated thereunder, including, but not limited to,

15 rules and regulations governing payment of authorized ex16 penses and commissions, fees and discounts to brokers and

17 dealers in trust certificates issued pursuant to section 505:

18 Provided, however, That no applicant for refinancing

19 under section 504 of this Act need demonstrate that a req20 uisite number of jobs will be created with the proceeds

21 of such refinancing.’’

22 SEC. 2. (a) The provisions of this Act are exercisable

23 at the option of the borrower.
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1 (b) Any new credit or spending authority provided for

2 in this Act is subject to amounts provided in advance in

3 appropriations Acts.

4 (c) There are authorized to be appropriated such

5 sums as may be necessary to carry out the provisions of

6 this Act.

7 (d) Within 30 days of the effective date of this Act,

8 the Administration shall promulgate such regulations as

9 are necessary, including establishing an order of priority

10 to accomplish the provisions of this Act.

11 (e) Subsection 504(b) of this Act is hereby repealed,

12 subsection 504(a) is renumbered as section 504, and para13 graphs (1) through (3) of subsection 504(a) are renum14 bered as subsections 504 (a) through (c).

Æ