I

103D CONGRESS

1ST SESSION H. R. 2130

To amend the Small Business Investment Act of 1958 to modify requirements

for payment and prepayment of debentures issued by State and local

development companies.

IN THE HOUSE OF REPRESENTATIVES

MAY 17, 1993

Mr. MACHTLEY (for himself, Mr. WYDEN, Mrs. MEYERS of Kansas, Mr. MAZZOLI, Mr. BILBRAY, Mr. MFUME, Mr. SARPALIUS, Mr. EMERSON, Mr.

OXLEY, Mr. DURBIN, Mr. HUGHES, Mr. STRICKLAND, Mr. THOMAS of

Wyoming, and Mr. LANCASTER) introduced the following bill; which was

referred to the Committee on Small Business

A BILL

To amend the Small Business Investment Act of 1958 to

modify requirements for payment and 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. SHORT TITLE.

4 This Act may be cited as ‘‘The Small Business 503

5 Loan Refinancing Assistance Act of 1993’’.
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1 SEC. 2. PAYMENT AND PREPAYMENT OF DEVELOPMENT

2 COMPANY DEBENTURES.

3 (a) IN GENERAL.—Title V of the Small Business In4 vestment Act of 1958 (15 U.S.C. 695 et seq.) is amended

5 by adding at the end the following new section:

6 ‘‘SEC. 507. PAYMENT AND PREPAYMENT OF DEVELOPMENT

7 COMPANY DEBENTURES.

8 ‘‘(a) IN GENERAL.—The issuer of a debenture pur9 chased by the Federal Financing Bank and guaranteed

10 by the Administration under section 503 may, at the elec11 tion of the borrower whose loan secures the debenture—

12 ‘‘(1) continue to make payments on the deben13 ture in accordance with the original terms of the

14 debenture;

15 ‘‘(2) if the requirements of subsection (b) are

16 met, make payments on the debenture at an ad17 justed rate of interest; or

18 ‘‘(3) if the requirements of subsection (c) are

19 met, prepay the debenture.

20 ‘‘(b) ADJUSTMENT OF INTEREST RATES.—

21 ‘‘(1) IN GENERAL.—The issuer of a debenture

22 described in subsection (a) may, at the election of

23 the borrower whose loan secures the debenture, sub24 mit to the Federal Financing Bank a request for an

25 adjustment in the rate of interest charged on the

26 debenture.
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1 ‘‘(2) APPROVAL.—The Federal Financing Bank

2 shall approve a request submitted by the issuer of a

3 debenture under paragraph (1) if—

4 ‘‘(A) the request is submitted on or before

5 the date which is 5 years after the date of the

6 enactment of this section;

7 ‘‘(B) no other request under this sub8 section has been approved with respect to the

9 debenture;

10 ‘‘(C) the debenture is outstanding and nei11 ther the debenture nor the borrower’s loan that

12 secures the debenture is in default on the date

13 of the request; and

14 ‘‘(D) the issuer agrees to make an equiva15 lent adjustment in the rate of interest charged

16 on the loan which secures the debenture.

17 ‘‘(3) DETERMINATION OF INTEREST RATE.—

18 Upon approving a request submitted by the issuer of

19 a debenture under paragraph (1), the Federal Fi20 nancing Bank shall adjust the rate of interest

21 charged on the debenture. The adjusted rate shall be

22 the rate determined by the Secretary of the Treas23 ury (as of the close of the calendar month preceding

24 the month in which the adjustment is made) to be

25 equal to the current average market yield on out-
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1 standing marketable obligations of the United States

2 with remaining periods of maturity comparable to

the remaining term of the debenture plus 41 3 ⁄2 per4 centage points, except that such rate shall be at

5 least 8 percent and shall not exceed 12 percent.

6 ‘‘(4) OTHER TERMS AND CONDITIONS.—An ad7 justment under this subsection in the rate of interest

8 charged on a debenture shall not affect other terms

9 and conditions applicable to the debenture.

10 ‘‘(c) PREPAYMENT.—

11 ‘‘(1) IN GENERAL.—If the requirements of

12 paragraph (3) are met, the issuer of a debenture de13 scribed in subsection (a) may, at the election of the

14 borrower whose loan secures such debenture, prepay

15 the debenture by paying to the Federal Financing

16 Bank, the amount that is equal to the sum of the

17 unpaid principal balance (adjusted for funds in the

18 borrower’s escrow reserve account) due on the de19 benture on the date of prepayment (plus accrued in20 terest at the coupon rate on the debenture) and the

21 amount of the repurchase premium described in

22 paragraph (2)(A).

23 ‘‘(2) REPURCHASE PREMIUM.—
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1 ‘‘(A) AMOUNT.—The amount of the repur2 chase premium described in this paragraph is

3 the product of—

4 ‘‘(i) the unpaid principal balance (ad5 justed for funds in the borrower’s escrow

6 reserve account) due on the debenture on

7 the date of prepayment;

8 ‘‘(ii) the interest rate of the deben9 ture; and

10 ‘‘(iii) the factor ‘P’, as determined

11 under subparagraph (B).

12 ‘‘(B) APPLICABLE PERCENT.—For pur13 poses of subparagraph (A)(iii), the factor ‘P’

14 means the applicable percent determined in ac15 cordance 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 or 25-

year term

loan

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

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

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

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

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

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

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

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

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

10 .............................................................. 0 0 .10

11 through 25 ........................................... 0 0

16 ‘‘(3) REQUIREMENTS.—The requirements of

17 this paragraph are met if—
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1 ‘‘(A) the debenture referred to in sub2 section (a) is outstanding and neither the de3 benture nor the borrower’s loan that secures

4 the debenture is in default on the date of pre5 payment;

6 ‘‘(B) only non-Federal funds are used to

7 prepay the debenture;

8 ‘‘(C) the debenture is prepaid on or before

9 the date which is 5 years after the date of the

10 enactment of this section; and

11 ‘‘(D) the issuer extinguishes the borrower’s

12 loan which secured such debenture.

13 ‘‘(d) PROHIBITION OF OTHER FEES AND PEN14 ALTIES.—Notwithstanding any other law, no fees or pen15 alties other than those specified in this section may be im16 posed against the issuer, the borrower, or the Administra17 tion as a condition for adjusting a rate of interest under

18 subsection (b) or as a condition of prepayment under sub19 section (c).

20 ‘‘(e) REGULATIONS.—The Administrator shall issue

21 regulations to carry out this section not later than 30 days

22 after the date of the enactment of this section.

23 ‘‘(f) DEFINITIONS.—For purposes of this section, the

24 following definitions apply:
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1 ‘‘(1) BORROWER.—The term ‘borrower’ means

2 a small business concern.

3 ‘‘(2) ISSUER.—The term ‘issuer’ means a quali4 fied State or local development company.

5 ‘‘(3) QUALIFIED STATE OR LOCAL DEVELOP6 MENT COMPANY.—The term ‘qualified State or local

7 development company’ has the meaning given such

8 term in section 503(e).’’.

9 (b) CLERICAL AMENDMENT.—The table of contents

10 of title V of the Small Business Investment Act of 1958

11 is amended by adding at the end the following new item:

‘‘Sec. 507. Payment and prepayment of development company debentures.’’.

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