Federal Register / Vol. 65, No. 80 / Tuesday, April 25, 2000 / Rules and Regulations 24105

noncompliance by the Borrower with

any provision thereof.

(f) Reporting. With respect to any loan

guaranteed by the Board pursuant to the

Act and this part the Lender shall

provide the Board with the following

information, in accordance with the

Guarantee:

(1) Audited financial statements for

the Borrower;

(2) Projected balance sheet, income

statement, and cash flows for the

Borrower for each year remaining on the

term of the loan; and

(3) A completed signed copy of Form

‘‘Quarterly Compliance Statement’’ that

includes information on the recent

performance of the loan, within 15 days

of the end of each calendar quarter.

(g) * * *

(1) Deterioration in the internal risk

rating of a loan guaranteed under this

Program within 5 business days of such

action by the Lender;

(2) The occurrence of each event of

default under the Loan Documents or

Guarantee promptly, but not later than

5 business days, of the Lender’s learning

of such occurrence; and

* * * * *

7. Section 400.213 is amended by

revising the section heading and

paragraph (a) to read as follows:

§ 400.213 Termination of obligations.

(a) The Board, in its discretion, shall

be entitled to terminate all, or a portion,

of the Board’s obligations under the

Guarantee, without further cause, in the

event that:

(1) The Guarantee fee required by

§ 400.208(d) shall not have been paid;

(2) A Lender shall have released or

covenanted not to sue the Borrower or

any other guarantor, or agreed to the

modification of any obligation of any

party to any agreement related to the

loan, without the prior written consent

of the Board;

(3) A Lender has released the Board

from its liability and obligations under

the Guarantee;

(4) A Lender shall have made any

incorrect or incomplete representation

to the Board in any material respect in

connection with the Application, the

Guarantee or the Loan Documents;

(5) A Lender fails to make a demand

for payment within 30 days of payment

default; or

(6) A Lender fails to comply with any

material provision of the Loan

Documents or the Guarantee.

* * * * *

§ 400.211 [Amended]

8. Section 400.211(g) introductory text

is amended by adding the phrase

‘‘H2500,’’ immediately after the phrase

‘‘U.S. Department of Commerce,’’.

[FR Doc. 00–9991 Filed 4–24–00; 8:45 am]

BILLING CODE 3510–NC–U

EMERGENCY OIL AND GAS

GUARANTEED LOAN BOARD

13 CFR Part 500

RIN 3003–ZA00

Emergency Oil and Gas Guaranteed

Loan Program; Conforming Changes

AGENCY: Emergency Oil and Gas

Guaranteed Loan Board.

ACTION: Final rule.

SUMMARY: The Emergency Oil and Gas

Guaranteed Loan Board (Board) is

amending the regulations governing the

Emergency Oil and Gas Guaranteed

Loan Program (Program). These changes

are meant to conform the regulations

and the guarantee agreement that will be

used for the program. The intent of

these changes is to eliminate potential

ambiguities or unintended conflicts

between the language of the regulations

and that of the Guarantee agreement.

This rule also makes several technical

changes to merely conform the

regulations with the standard of care

adopted by the Board, to conform the

regulations to the form of the Guarantee

and form of Application for Guarantee

adopted by the Board, correct minor

typographical errors and add a mail stop

to the Board’s mailing address, or to

clarify the allocation of Lender

responsibilities, liabilities and

restrictions in circumstances where

more than one lender are parties to the

Guarantee.

DATES: This rule is effective April 25,

2000.

FOR FURTHER INFORMATION CONTACT:

Charles E. Hall, Executive Director,

Emergency Oil and Gas Guaranteed

Loan Board, U.S. Department of

Commerce, Room H2500, Washington,

DC 20230, (202) 219–0584.

SUPPLEMENTARY INFORMATION: On

October 27, 1999, the Board published

a final rule codifying at Chapter 5, Title

13, Code of Federal Regulations (CFR),

regulations implementing the Program,

as established in Chapter 1 of Public

Law 106–51, the Emergency Oil and Gas

Guaranteed Loan Act of 1999 (64 FR

57946).

Section 500.2 sets forth certain

definitions applicable to the Program.

This rule adds a definition of ‘‘Agent’’,

a term used in the Guarantee to refer to

the applicant lender that is designated

to perform certain duties on behalf of all

lenders where more than one lender are

parties to a Guarantee.

This rule also modifies the definition

of ‘‘Guarantee’’ in § 500.2 to make clear

that more than one lender may be

parties to a Guarantee. The definition of

‘‘Lender’’ in § 500.2 is also modified to

specify that in a multi-lender Guarantee,

the term ‘‘Lender’’ means ‘‘Agent’’.

Section 500.201 of the Board’s

regulations sets forth the definition of

an eligible lender for purposes of the

Act and the factors that the Board will

assess in determining whether the Board

should issue a Guarantee to a particular

applicant lender. The Board is

amending this section of its regulations

to clarify that multiple lenders under

one application for a guarantee must

each meet the Eligible Lender

requirements, to require that an

application for guarantee from more

than one lender identify the lender that

will act as Agent, and to set forth the

respective responsibilities and liabilities

of individual lenders, where more than

one lender are parties to a Guarantee.

Section 500.205 of the Board’s

regulations specifies the information

and documentation to be contained in

an application for guarantee. The

section is being modified to include a

reference to documentation

demonstrating that the lender is eligible

under § 500.201(a) and to allow the

Board to make a determination to issue

the guarantee to such lender under

§ 500.201(c), as required by paragraph

36 of the Board’s form of Application for

Guarantee.

Section 500.210 of the Board’s

regulations sets forth restrictions and

limitations on transfer of interests in a

guaranteed loan. The section has been

revised to reflect the fact that there may

be multiple lenders that are parties to a

Guarantee, and to allow transfer by a

non-Agent lender of the non-guaranteed

portion of a loan after payment under

the Guarantee has been made.

Section 500.211 sets forth lender

responsibilities under the Program.

Paragraph (b) of this section sets forth a

standard of care applicable to actions

taken by a lender. Specifically, the

regulations state:

The Lender shall exercise due care and

diligence in administering the loan as would

be exercised by a responsible and prudent

banking institution when administering a

secured loan of such banking institution’s

own funds without a Federal guaranty. Such

standard shall also apply to any and all

approvals, determinations, permissions,

acceptances, requirements, or opinion made,

given, imposed or reached by Lender.

(emphasis added).

Subsequent to publication of the final

rule, the Board has been informed that

24106 Federal Register / Vol. 65, No. 80 / Tuesday, April 25, 2000 / Rules and Regulations

the formulation of the standard of care

commonly used among commercial

lenders requires the exercise of due care

and diligence in administering the loan

as would be exercised by a reasonable

and prudent banking institution.

(emphasis added). As such, the Board is

amending its regulations to include the

word ‘‘reasonable’’ in lieu of

‘‘responsible’’ as that is the term

accepted and understood by commercial

lenders to express the standard of care.

Paragraph (c) of § 500.211 requires a

representation and agreement by the

lender that it is able to, and will,

administer the loan in accordance with

the applicable standard of care. The

paragraph has been modified to limit

the representation and agreement to the

applicant lender where there are

multiple lenders that are parties to a

Guarantee.

Paragraph (e) of § 500.211 specifies

lender obligations with respect to loan

monitoring. The paragraph is being

amended to eliminate a requirement for

best efforts to cause Borrower correction

of any noncompliance with loan

documents, because it is inconsistent

with the ‘‘reasonable and prudent’’

standard of care that has been adopted

by the Board.

Paragraph (f) of § 500.211 sets forth

reporting requirements concerning

guaranteed loans. The paragraph has

been modified to eliminate certain

references to specific due dates for

reporting and instead refer to the terms

of the Guarantee for such dates.

Paragraph (g) of § 500.211 states, in

relevant part, that the Lender must

notify the Board in writing without

delay of the deterioration in the internal

risk rating of a loan guaranteed under

the Program within 3 business days of

such action by the Lender; and the

occurrence of each event of default

under the Loan Documents or Guarantee

promptly, but not later than 3 business

days, of the Lender’s learning of such

occurrence. This rule merely changes,

from three days to five days, the time

within which the lender must provide

notification of these events to the Board.

This change is being made to provide

lenders additional time to both discover

and report the listed events.

Section 500.213 of the Board’s

regulations specifies the circumstances

under which the Board in its discretion

shall be entitled to terminate a

guarantee. The section has been

modified to conform to the form of

Guarantee adopted by the Board by

eliminating a reference to the possibility

that a Guarantee might be executed

before loan closing, eliminating a

requirement for written notice of

termination, and providing for partial as

well as entire termination of a guarantee

where there are multiple lenders that

are parties to a Guarantee.

This rule does not affect a substantive

change to the existing regulations. The

government will hold lenders to the

same standard of care using the term

‘‘reasonable’’ as it would have using the

term ‘‘responsible.’’ This change is

meant to clarify the regulations by using

a term familiar to the lending

community to express that standard of

care. With regard to the time by which

a lender must notify the Board of certain

events, this rule does not change the

events requiring notification, it merely

changes the maximum time, from three

days to five days, by which such reports

must be made. The other changes

merely conform the regulations with the

standard of care adopted by the Board,

conform the regulations to the form of

Guarantee and form of Application for

Guarantee adopted by the Board, correct

a typographical error, or clarify the

allocation of Lender responsibilities,

liabilities and restrictions in

circumstances where more than one

lender are parties to a Guarantee.

Administrative Law Requirements

Executive Order 12866

This final rule has been determined

not to be significant for purposes of

Executive Order 12866.

Administrative Procedure Act

This rule is exempt from the

rulemaking requirements contained in 5

U.S.C. 553 pursuant to authority

contained in 5 U.S.C. 553(a)(2) as it

involves a matter relating to loans. As

such, prior notice and an opportunity

for public comment and a delay in

effective date otherwise required under

5 U.S.C. 553 are inapplicable to this

rule.

Regulatory Flexibility Act

Because this rule is not subject to a

requirement to provide prior notice and

an opportunity for public comment

pursuant to 5 U.S.C. 553, or any other

law, the analytical requirements of the

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

et seq., are inapplicable.

Congressional Review Act

This rule has been determined to be

not major for purposes of the

Congressional Review Act, 5 U.S.C. 801

et seq.

Intergovernmental Review

No intergovernmental consultations

with State and local officials is required

because the rule is not subject to the

provisions of Executive Order 12372 or

Executive Order 12875.

Unfunded Mandate Reform Act of 1995

This rule contains no Federal

mandates, as that term is defined in the

Unfunded Mandates Reform Act, on

State, local and tribal governments or

the private sector.

Executive Order 13132

This rule does not contain policies

having federalism implications

requiring preparation of a Federalism

Assessment.

Executive Order 12630

This rule does not contain policies

that have takings implications.

List of Subjects in 13 CFR Part 500

Administrative practice and

procedure, Loan programs—oil and gas,

Reporting and recordkeeping

requirements.

Charles E. Hall,

Executive Director, Emergency Oil and Gas

Guaranteed Loan Board.

For the reasons set forth in the

preamble, the Emergency Oil and Gas

Guaranteed Loan Board amends 13 CFR

part 500 as follows:

PART 500—EMERGENCY OIL AND

GAS GUARANTEED LOAN PROGRAM

1. The authority citation for part 500

continues to read as follows:

Authority: Pub. L. 106–51, 113 Stat. 255

(15 U.S.C. 1841 note).

2. Section 500.2 is amended by

redesignating paragraphs (c) through (k)

as paragraphs (d) through (l), by adding

a new paragraph (c), and by revising

redesignated paragraphs (g) and (h) to

read as follows:

§ 500.2 Definitions.

* * * * *

(c) Agent means that Lender

authorized to take such actions, exercise

such powers, and perform such duties

on behalf and in representation of all

Lenders party to a Guarantee of a single

loan, as is required by, or necessarily

incidental to, the terms and conditions

of the Guarantee.

* * * * *

(g) Guarantee means the written

agreement between the Board and one

or more Lenders, and approved by the

Borrower, pursuant to which the Board

guarantees repayment of a specified

percentage of the principal of the loan,

including the Special Terms and

Conditions, the General Terms and

Conditions, and all exhibits thereto.

(h) Lender means a private banking or

investment institution, eligible under

§ 500.201, that is a party to a Guarantee

Federal Register / Vol. 65, No. 80 / Tuesday, April 25, 2000 / Rules and Regulations 24107

issued by the Board. With respect to a

Guarantee of a single loan to which

more than one Lender is a party, the

term Lender means Agent.

* * * * *

3. Section 500.201 is amended by

redesignating paragraphs (b) and (c) as

paragraphs (c) and (d) and adding a new

paragraph (b) to read as follows:

§ 500.201 Eligible Lender.

* * * * *

(b)(1) If more than one banking or

investment institution is applying to the

Board for a Guarantee of a single loan,

each one of the banking or investment

institutions on the application must

meet the requirements to be an eligible

lender set forth in paragraph (a) of this

section.

(2) An application for a Guarantee of

a single loan submitted by a group of

banking or investment institutions, as

described in paragraph (b)(1) of this

section, must identify one of the

banking or investment institutions

applying for such loan to act as agent for

all. This agent is responsible for

administering the loan and shall have

those duties and responsibilities

required of an agent, as set forth in the

Guarantee.

(3) Each Lender, irrespective of any

indemnities or other agreements

between the Lenders and the Agent,

shall be bound by all actions, and/or

failures to act, of the Agent. The Board

shall be entitled to rely upon such

actions and/or failures to act of the

Agent as binding the Lenders.

* * * * *

4. Section 500.205 is amended by

revising paragraph (b)(11) to read as

follows

§ 500.205 Application process.

* * * * *

(b) * * *

(11) Documentation sufficient to

demonstrate that the Lender is eligible

under § 500.201(a) and to allow the

Board to make a determination to issue

a Guarantee to such Lender as set forth

in § 500.201(c).

* * * * *

5. Section 500.210 is amended by

revising paragraph (b), by removing the

period at end of paragraph (c)(2)(iv) and

adding ‘‘; or’’ in its place, and by adding

a new paragraph (c)(3) to read as

follows:

§ 500.210 Assignment or transfer of loans.

* * * * *

(b) Under no circumstances will the

Board permit an assignment or transfer

of less than 100 percent of a Lender’s

interest in the Loan Documents and

Guarantee, nor will it permit an

assignment or transfer to be made to a

party which the Board determines not to

be an Eligible Lender pursuant to

§ 500.201.

(c) * * *

(3) Transfer by a non-Agent Lender of

the non-guaranteed portion of the loan

after payment under the Guarantee has

been made.

6. Section 500.211 is amended by

revising paragraphs (b), (c), (e), (f), (g)(1)

and (g)(2) to read as follows:

§ 500.211 Lender responsibilities.

* * * * *

(b) Standard of care. The Lender shall

exercise due care and diligence in

administering the loan as would be

exercised by a reasonable and prudent

banking institution when administering

a secured loan of such banking

institution’s own funds without a

Federal guaranty. Such standard shall

also apply to any and all approvals,

determinations, permissions,

acceptances, requirements, or opinion

made, given, imposed or reached by

Lender.

(c) Representation to the Board. In

addition to any other representations

required by the Guarantee, the

Applicant shall represent to the Board

that it has the ability to, and will,

administer the loan, as well as to

exercise the Applicant’s rights and

pursue its remedies, including

conducting any liquidation of the

Security or additional Security in full

compliance with the standard of care,

without the need for any advice,

opinion, determination,

recommendation, approval, disapproval,

assistance (financial or other) or

participation by the Board, except

where the Board’s consent is expressly

required by the Guarantee, or where the

Board, in its sole discretion and

pursuant to the Guarantee, elects to

provide same.

* * * * *

(e) Monitoring. In accordance with the

Guarantee the Lender shall monitor

Borrower’s performance under the Loan

Documents to detect any

noncompliance by the Borrower with

any provision thereof.

(f) Reporting. With respect to any loan

guaranteed by the Board pursuant to the

Act and this part the Lender shall

provide the Board with the following

information, in accordance with the

Guarantee:

(1) Audited financial statements for

the Borrower;

(2) Projected balance sheet, income

statement, and cash flows for the

Borrower for each year remaining on the

term of the loan; and

(3) A completed signed copy of Form

‘‘Quarterly Compliance Statement’’ that

includes information on the recent

performance of the loan, within 15 days

of the end of each calendar quarter.

(g) * * *

(1) Deterioration in the internal risk

rating of a loan guaranteed under this

Program within 5 business days of such

action by the Lender;

(2) The occurrence of each event of

default under the Loan Documents or

Guarantee promptly, but not later than

5 business days, of the Lender’s learning

of such occurrence; and

* * * * *

7. Section 500.213 is amended by

revising the section heading and

paragraph (a) to read as follows:

§ 500.213 Termination of obligations.

(a) The Board, in its discretion, shall

be entitled to terminate all, or a portion,

of the Board’s obligations under the

Guarantee, without further cause, in the

event that:

(1) The Guarantee fee required by

§ 500.208(d) shall not have been paid;

(2) A Lender shall have released or

covenanted not to sue the Borrower or

any other guarantor, or agreed to the

modification of any obligation of any

party to any agreement related to the

loan, without the prior written consent

of the Board;

(3) A Lender has released the Board

from its liability and obligations under

the Guarantee;

(4) A Lender shall have made any

incorrect or incomplete representation

to the Board in any material respect in

connection with the Application, the

Guarantee or the Loan Documents;

(5) A Lender fails to make a demand

for payment within 30 days of payment

default; or

(6) A Lender fails to comply with any

material provision of the Loan

Documents or the Guarantee.

* * * * *

§ 500.211 [Amended]

8. Section 500.211(g) introductory text

is amended by adding the phrase

‘‘H2500,’’ immediately after the phrase

‘‘U.S. Department of Commerce,’’.

[FR Doc. 00–9992 Filed 4–24–00; 8:45 am]

BILLING CODE 3510–NC–U