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. MAZ-
ZOLI, 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.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as ‘‘The Small Business 503
Loan Refinancing Assistance Act of 1993’’.
‘‘(2) APPROVAL.—The Federal Financing Bank
shall approve a request submitted by the issuer of a
debenture under paragraph (1) if—
‘‘(A) the request is submitted on or before
the date which is 5 years after the date of the
enactment of this section;
‘‘(B) no other request under this sub-
section has been approved with respect to the
debenture;
‘‘(C) the debenture is outstanding and nei-
ther the debenture nor the borrower’s loan that
secures the debenture is in default on the date
of the request; and
‘‘(D) the issuer agrees to make an equiva-
lent adjustment in the rate of interest charged
on the loan which secures the debenture.
‘‘(3) DETERMINATION
OF
INTEREST
RATE.—
Upon approving a request submitted by the issuer of
a debenture under paragraph (1), the Federal Fi-
nancing Bank shall adjust the rate of interest
charged on the debenture. The adjusted rate shall be
the rate determined by the Secretary of the Treas-
ury (as of the close of the calendar month preceding
the month in which the adjustment is made) to be
equal to the current average market yield on out-
standing marketable obligations of the United States
with remaining periods of maturity comparable to
the remaining term of the debenture plus 41⁄2 per-
centage points, except that such rate shall be at
least 8 percent and shall not exceed 12 percent.
‘‘(4) OTHER TERMS AND CONDITIONS.—An ad-
justment under this subsection in the rate of interest
charged on a debenture shall not affect other terms
and conditions applicable to the debenture.
‘‘(c) PREPAYMENT.—
‘‘(1) IN
GENERAL.—If the requirements of
paragraph (3) are met, the issuer of a debenture de-
scribed in subsection (a) may, at the election of the
borrower whose loan secures such debenture, prepay
the debenture by paying to the Federal Financing
Bank, the amount that is equal to the sum of the
unpaid principal balance (adjusted for funds in the
borrower’s escrow reserve account) due on the de-
benture on the date of prepayment (plus accrued in-
terest at the coupon rate on the debenture) and the
amount of the repurchase premium described in
paragraph (2)(A).
‘‘(2) REPURCHASE PREMIUM.—
‘‘(A) AMOUNT.—The amount of the repur-
chase premium described in this paragraph is
the product of—
‘‘(i) the unpaid principal balance (ad-
justed for funds in the borrower’s escrow
reserve account) due on the debenture on
the date of prepayment;
‘‘(ii) the interest rate of the deben-
ture; and
‘‘(iii) the factor ‘P’, as determined
under subparagraph (B).
‘‘(B) APPLICABLE
PERCENT.—For pur-
poses of subparagraph (A)(iii), the factor ‘P’
means the applicable percent determined in ac-
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 ..............................................................
.25
.50
7 ..............................................................
.10
.40
8 ..............................................................
.30
9 ..............................................................
.20
10 ..............................................................
.10
11 through 25 ...........................................
‘‘(3) REQUIREMENTS.—The requirements of
this paragraph are met if—
‘‘(A) the debenture referred to in sub-
section (a) is outstanding and neither the de-
benture nor the borrower’s loan that secures
the debenture is in default on the date of pre-
payment;
‘‘(B) only non-Federal funds are used to
prepay the debenture;
‘‘(C) the debenture is prepaid on or before
the date which is 5 years after the date of the
enactment of this section; and
‘‘(D) the issuer extinguishes the borrower’s
loan which secured such debenture.
‘‘(d) PROHIBITION
OF OTHER FEES
AND PEN-
ALTIES.—Notwithstanding any other law, no fees or pen-
alties other than those specified in this section may be im-
posed against the issuer, the borrower, or the Administra-
tion as a condition for adjusting a rate of interest under
subsection (b) or as a condition of prepayment under sub-
section (c).
‘‘(e) REGULATIONS.—The Administrator shall issue
regulations to carry out this section not later than 30 days
after the date of the enactment of this section.
‘‘(f) DEFINITIONS.—For purposes of this section, the
following definitions apply:
‘‘(1) BORROWER.—The term ‘borrower’ means
a small business concern.
‘‘(2) ISSUER.—The term ‘issuer’ means a quali-
fied State or local development company.
‘‘(3) QUALIFIED
STATE
OR
LOCAL
DEVELOP-
MENT COMPANY.—The term ‘qualified State or local
development company’ has the meaning given such
term in section 503(e).’’.
(b) CLERICAL AMENDMENT.—The table of contents
of title V of the Small Business Investment Act of 1958
is amended by adding at the end the following new item:
‘‘Sec. 507. Payment and prepayment of development company debentures.’’.
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