[Federal Register: January 30, 2003 (Volume 68, Number 20)]
[Rules and Regulations]
[Page 4684-4692]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30ja03-3]
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DEPARTMENT OF AGRICULTURE
Rural Utilities Service
7 CFR Part 1738
RIN 0572-AB81
Rural Broadband Access Loans and Loan Guarantees
AGENCY: Rural Utilities Service, USDA.
ACTION: Final rule.
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SUMMARY: The Rural Utilities Service (RUS) is amending its regulations
in order to establish the Rural Broadband Access Loan and Loan
Guarantee Program as authorized by the Farm Security and Rural
Investment Act of 2002 (Pub. L. 101-171) (2002 Act). Section 6103 of
the Farm Security and Rural Investment Act of 2002 amended the Rural
Electrification Act of 1936, as amended (RE Act), to add Title VI,
Rural Broadband Access, to provide loans and loan guarantees to fund
the cost of construction, improvement, or acquisition of facilities and
equipment for the provision of broadband service in eligible rural
communities. This final rule prescribes the types of loans available,
facilities financed, and eligible applicants, as well as minimum credit
support requirements to be considered for a loan. In addition, the rule
prescribes the process through which RUS will consider applicants under
the priority consideration and the state allocations required in Title
VI.
EFFECTIVE DATE: This rule is effective January 30, 2003.
FOR FURTHER INFORMATION CONTACT: Roberta D. Purcell, Assistant
Administrator, Telecommunications Program, Rural Utilities Service,
U.S. Department of Agriculture, 1400 Independence Avenue, SW., STOP
1590, Room 4056, Washington, DC 20250-1590. Telephone number (202) 720-
9554, Facsimile (202) 720-0810.
SUPPLEMENTARY INFORMATION:
Notice and Comment
Section 6103(b) of the 2002 Act requires that the regulations
necessary to implement the Rural Broadband Access Loan and Loan
Guarantee Program are to be promulgated without regard to the notice
and comment provisions of 5 U.S.C. 553 or the Statement of Policy of
the Secretary of Agriculture, effective July 24, 1971 (36 FR 13804),
relating to notices of proposed rulemaking and public participation in
rulemaking. Therefore, these regulations are issued as a final rule.
Executive Order 12866
This rule has been determined to be significant for purposes of
Executive Order 12866 and, therefore, has been reviewed by the Office
of Management and Budget (OMB). In accordance with Executive Order
12866, an Economic Impact Analysis was completed, outlining the costs
and benefits of implementing this program in rural America. The
complete analysis is available from RUS upon request.
Executive Order 12988
This rule has been reviewed under Executive Order 12988, Civil
Justice Reform. RUS has determined that this rule meets the applicable
standards provided in section 3 of that Executive Order. In addition,
all State and local laws and regulations that are in conflict with this
rule will be preempted. No retroactive effect will be given to the rule
and, in accordance with section 212(e) of the Department of Agriculture
Reorganization Act of 1994 (7 U.S.C. 6912(e)), administrative appeal
procedures must be exhausted before an action against the Department or
its agencies may be initiated.
Regulatory Flexibility Act Certification
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) is not
applicable to this rule because the agency is not required by 5 U.S.C.
553 or any other law to publish a notice of proposed rulemaking for the
subject matter of this rule. The RUS broadband program provides loans
to borrowers at interest rates and terms that are more favorable than
those generally available from the private sector. RUS borrowers, as a
result of obtaining federal financing, receive economic benefits that
exceed any direct cost associated with complying with RUS regulations
and requirements.
Information Collection and Recordkeeping Requirements
Section 1601(c) of the 2002 Act provides that the promulgation of
regulations necessary to implement the Rural Broadband Access Loan and
Loan Guarantee Program shall be made without regard to chapter 5 of
title 44 of the United States Code (the Paperwork Reduction Act).
Catalog of Federal Domestic Assistance
The program described by this rule is listed in the Catalog of
Federal Domestic Assistance Programs under No. 10.851, Rural Telephone
Loans and Loan Guarantees; No. 10.852, Rural Telephone Bank Loans; and
No. 10.857, Rural Broadband Access 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. Telephone: (202) 512-1800.
Executive Order 12372
This rule is excluded from the scope of Executive Order 12372,
Intergovernmental Consultation, which may require consultation with
State and local officials. See the final rule related notice entitled
``Department Programs and Activities Excluded from Executive Order
12372,'' (50 FR 47034).
Unfunded Mandates
This rule contains no Federal mandates (under the regulatory
provision of Title II of the Unfunded Mandate Reform Act of 1995) for
State, local, and tribal governments or the private sector. Thus, this
rule is not subject to the requirements of sections 202 and 205 of the
Unfunded Mandate Reform Act of 1995.
National Environmental Policy Act Certification
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.
[[Page 4685]]
Background
Section 6103 of the 2002 Act amended the RE Act, to add Title VI,
Rural Broadband Access, to provide loans and loan guarantees to fund
the costs of construction, improvement, or acquisition of facilities
and equipment for the provision of broadband service in eligible rural
communities. Title VI defines eligible communities and entities, and
sets forth the types of loans, as well as a state allocation system and
a priority system for consideration of applicants.
Section 6103(b) of the 2002 Act provides that the regulations for
this program are exempt from the notice and comment provisions of
section 553 of title 5, United States Code (Administrative Procedures
Act). RUS held a public meeting on June 27, 2002, in order to obtain
background information for consideration in the implementation and
administration of the Rural Broadband Access program. There were 22
presenters including lenders, telecommunications and broadband
providers, trade associations, and capital market specialists. The
presenter's written comments are available on the RUS Web site at
http://www.usda.gov/rus/telecom/publicmeeting/public_meeting.htm.
RUS considered the oral and written comments of the presenters as
well as the Conference Report accompanying the 2002 Act (Report 107-
424) to formulate the regulations implementing the Rural Broadband
Access Loan and Loan Guarantee Program.
Types of loans. The Rural Broadband Access Loan and Loan Guarantee
Program will offer three types of loans: (1) A direct cost-of-money
loan, bearing interest at the cost of borrowing to the Department of
the Treasury for obligations of comparable maturity; (2) a direct 4
percent loan; and (3) a private lender guaranteed loan.
Eligible entities can apply for a direct cost-of-money loan or a
private lender guaranteed loan to provide service in any eligible rural
community. Four-percent direct loans will be available only to provide
service in the most rural, economically-challenged communities which
currently do not have broadband service to residents.
Four-percent direct loans will be available to eligible entities
proposing to provide service in communities with no residential
broadband service, population of 2,500 or less, and certain density and
income requirements. The density requirement is a maximum number of
persons per square mile of the applicant's defined service area. The
income requirement is the average per capita income in the county
containing the applicant's service area as a percent of the national
average per capita income. This requirement will be set at a maximum
number. The income and density requirements are subject to review and
adjustment on an annual basis and will be published in the Federal
Register at the beginning of each fiscal year.
All the requirements for a 4-percent loan are in place to encourage
build out of broadband facilities to the very poor, rural parts of the
country. RUS feels that offering a fixed low interest rate program for
these areas helps offset the high cost of serving remote areas which
require more telecommunications plant per subscriber than the more
densely populated communities.
Credit support requirement. At the public hearing on June 27, RUS
heard comments from lenders and equity capital specialists on financing
broadband infrastructure projects. In all cases, the lender or investor
would require the borrower to contribute support to the project, from
35 to 100 percent of the cost of the project. This reflects the risk
that lenders and investors perceive to exist in these projects. The
contributions can be in the form of assets, cash, or guarantees from
parent companies.
RUS believes that prudent lending practice, especially in the
current telecommunications environment, dictates a credit support
requirement as well. RUS also considered what form of support would be
appropriate.
RUS set the requirement at a lower percent than other
telecommunications lenders, 20 percent of the requested loan amount.
This lower requirement is enhanced by the requirement that certain
applicants have, at the time of application, sufficient cash on hand to
support operations for one year. This amount can be part of the minimum
20 percent requirement, or if the cash required for one year of
operating expenses is in excess of 20 percent of the loan, that cash
requirement will be the minimum requirement. RUS set this requirement
for start-up broadband operations to assure that they have cash on hand
to cover operations until revenues generate sufficient cash flows to
pay expenses as they become due.
RUS recognizes that the expenses of an ongoing telecommunications
company can be covered through a regular stream of revenues, and
therefore the need to have a large amount of cash on hand is
unnecessary and imprudent. This requirement may deter operating
telecommunications companies with a viable business plan from applying
for funds to upgrade facilities for broadband, perhaps denying a rural
community of broadband service. Therefore, RUS will waive the minimum
cash requirement for an ongoing company that can show positive cash
flow for the two calendar years immediately preceding the date of the
application.
Priority Consideration. Title VI directs RUS to give priority to
eligible rural communities in which broadband service is not available.
In addition, following Congressional guidance in the Conference Report
accompanying the 2002 Act (H.R. Rpt. 107-424, 107th Cong. 2nd Sess.,
579), RUS will evaluate for expedited approval, any completed
application which meets the priority criteria and to evaluate the
priority classification of applications on hand at least once every
three months.
In addition, pursuant to Title VI, RUS will set up a State reserve
in which, for the first 6 months of each fiscal year, the available
funding for the fiscal year is allocated among the States, territories,
and insular possessions based on the number of communities with
populations of 2,500 or less in each State, territory, and insular
possession in relation to the total number of such communities in the
United States, its territories, and insular possessions.
At the same time, RUS did not want completed, feasible applications
which did not meet the priority consideration to go unfunded until the
end of the fiscal year. Consequently, RUS came up with a priority
system which allows for the funding of completed, feasible applications
in a timely manner so long as funding is available in the applicant's
state reserve or, after April 1 of the fiscal year, the national
reserve.
RUS will expedite for consideration for funding, applications
proposing to provide service where none is physically available on a
first-in, first-out basis. RUS will also give a lesser priority to
those areas currently receiving service but (1) at rates that are not
comparable to those in neighboring urban and suburban areas or (2) of
quality that is considered unsatisfactory due to, among other criteria,
data rate restrictions, system latency, or unreliable connections.
One-time priority for pilot program applicants. Language in the
Conference Report accompanying the 2002 Act (H.R. Rpt. 107-424, 107th
Cong. 2nd Sess., 579), specifically states, ``The Managers expect the
RUS to evaluate the priority status of all pending broadband
applications as soon as practicable after the date of enactment. Any
completed application which meets the priority criteria should be
evaluated for expedited approval.''
[[Page 4686]]
The pending, unfunded applications received under the broadband
pilot program were returned to the applicants as required in the
Federal Register at 67 FR 3140. Therefore, RUS has given these
applicants a 30-day window to reapply under the requirements of this
section. Applications which are submitted and determined to be complete
within 30 days of publication of this section will be given priority
for funding over new applicants under this program. Only completed
applications which are technically and economically feasible will be
considered for funding.
Availability of broadband service. As state above, Title VI directs
RUS to give priority to eligible rural communities in which broadband
service is not available. RUS took into consideration its long history
in the telecommunications program in setting forth the criteria for
determining the availability of broadband service and decided to
consider not only whether broadband was physically available but also
the quality of any existing broadband service in a community in
granting priority status for funding.
RUS will first consider applications proposing to provide service
where none is physically available, the ``unserved'' communities.
Second, RUS will consider applications proposing to provide service
where rates are not comparable to similar service in urban and suburban
areas, or quality of service is not satisfactory, the ``underserved''
communities.
In determining whether broadband service is available, RUS requires
the applicant to publish a legal notice stating its intent to provide
service in a community and requesting any incumbent provider to submit
certain information to RUS including service territory, cost of
service, rates of data transmission. RUS understands that this may be
Confidential Business Information and will protect the confidentiality
of the information.
Acquisitions. Title VI permits the use of loan funds for the
acquisition of facilities and equipment for the provision of broadband
facilities. However, RUS believes the primary intent of the legislation
is to provide funding for broadband deployment in rural communities
where residential service is not available. RUS will fund the
acquisition of eligible facilities and equipment only if the applicant
demonstrates it is necessary and incidental to furnishing or improving
rural broadband service and the acquisition is less than 50 percent of
the loan amount requested.
Refinancing. Title VI permits RUS to refinance existing RUS
telecommunications debt if the use of the proceeds will further the
construction, improvement, or acquisition of facilities and equipment
for broadband service. RUS will limit the funds lent for refinancing to
40 percent of the total loan amount.
Competition with Existing RUS Telecommunications Borrowers. RUS
believes that loan security for an existing telecommunications borrower
may be at risk should RUS fund a competing service which could also
offer traditional telephone service in addition to broadband service.
However, residents in RUS telecommunications borrower service areas
should not be denied the opportunity to subscribe to broadband service
if the incumbent is not willing to provide the service. RUS will give
existing telecommunication borrowers a two-year window in which RUS
would not consider applications proposing to offer broadband service in
an existing RUS telecommunications borrower's service area if the
existing borrower, not later than 90 days after RUS receipt of an
application proposing to provide broadband service in the borrower's
local exchange service territory, submits to RUS a letter of intent to
provide or begin to construct residential broadband service in its
local exchange service territory within two years.
The incumbent RUS telecommunications borrower must provide, prior
to October 1, 2004, support of its intent through submitting either a
loan application to construct broadband facilities to RUS or another
lender or proof that construction of broadband facilities has begun.
Should the existing telecommunications borrower construct or begin to
construct broadband facilities during the two-year window, RUS will not
consider any applications proposing to provide competitive broadband
service in that incumbent borrower's territory. RUS will monitor the
incumbent's compliance with the letter of intent through onsite
inspections or any other means necessary. If the borrower is not making
satisfactory progress in providing broadband service in its local
exchange service territory, RUS will consider applications proposing to
provide broadband service in their territory.
This same principle will hold for borrowers under the Rural
Broadband Access Loan and Loan Guarantee Program. In order to protect
loan security, RUS will not fund applications proposing to construct
broadband facilities in communities served by borrowers using funds
under this part regardless of the definition used for broadband service
at the time of loan approval.
Rate-of-data transmission criteria for defining broadband service.
Title VI states that the Secretary shall review and recommend
modifications of rate-of-data transmission criteria for purposes of the
identification of broadband service technologies. Given the rate of
change in technology RUS feels that the rate-of-data transmission
criteria may need to be changed within the 6-year time frame of the
broadband loan program. Therefore, RUS will publish the criteria in the
Federal Register at the beginning of each fiscal year. The newly
published rate will be the minimum for all new applicants in that
fiscal year. Unfunded, complete applications from the previous fiscal
year will not be required to meet the new rate-of-data transmission
criteria. Those applications will be evaluated for approval on the
basis of the criteria in place as of the date of completion.
Conference language also suggests that RUS continue the use of the
FCC definition of broadband service, as was used in the pilot program,
in order to ``* * * continue the current high standard used by RUS in
determining what broadband service is.'' In the broadband pilot
program, RUS used the FCC standard for ``advanced telecommunications
capability'' as the rate-of-data transmission criteria for broadband.
As of the date of publication of this regulation, the FCC uses the term
``advanced telecommunications capability'' to describe services and
facilities with an upstream (customer-to-provider) and downstream
(provider-to-customer) transmission speed exceeding 200 kilobits per
second. RUS will continue to use this current standard for the rate-of-
data transmission criteria unless the FCC changes the rate used in
``advanced telecommunications capability''. If FCC changes the rate,
RUS will revisit its definition of broadband. RUS recognizes the value
of coordinating with other agencies in determining rate-of-data
transmission criteria for the purpose of determining broadband, and
will continue to do so.
Notice of application deadline. At the beginning of each fiscal
year, RUS will publish in the Federal Register a Notice of Application
Deadline. The notice will cover those items in the regulation which are
subject to annual review and change, including loan levels in each type
of loan, rate-of-data transmission criteria, density and income
requirements for 4-percent direct loans, and the dollar amounts
available in each State under the allocation.
[[Page 4687]]
List of Subjects in 7 CFR Part 1738
Broadband, Loan programs-communications, Rural areas, Telephone,
Telecommunications.
For reasons set out in the preamble, RUS amends chapter XVII of
title 7 of the Code of Federal Regulations by adding a new part 1738 to
read as follows:
PART 1738--RURAL BROADBAND ACCESS LOANS AND LOAN GUARANTEES
Subpart A--General
Sec.
1738.1 General statement.
1738.2 Definitions.
1738.3--1738.9 [Reserved]
Subpart B--Loan Purposes and Basic Policies
1738.10 General.
1738.11 Availability of broadband service.
1738.12 Location of facilities.
1738.13 Allocation of funds.
1738.14 One-time priority for unfunded applications from the
broadband pilot program
1738.15 Priorities.
1738.16 Eligible entities.
1738.17 Civil rights.
1738.18 Minimum and maximum loan amount.
1738.19 Facilities financed.
1738.20 Equity requirement.
1738.21 Interim financing.
1738.22 Loan security.
1738.23--1738.29 [Reserved].
Subpart C--Types of Loans
1738.30 Rural broadband access loans and loan guarantees.
1738.31 Full faith and credit.
1738.32--1738.39 [Reserved]
Subpart D--Terms of Loans
1738.40 General.
1738.41 Payments on loans.
1738.42--1738.49 [Reserved]
Authority: Pub. L. 107-171, 7 U.S.C. 901 et seq.
Subpart A--General
Sec. 1738.1 General statement.
(a) This part sets forth the general policies, types of loans and
loan guarantees, and program requirements under the Rural Broadband
Access Loan and Loan Guarantee Program to provide funds for the costs
of the construction, improvement, and acquisition of facilities and
equipment for broadband service in eligible rural communities.
(b) Additional information regarding the Rural Broadband Access
Loan and Loan Guarantee Program can be found in RUS Bulletin 1738-1,
``Rural Broadband Access Loan and Loan Guarantee Application Guide''
and RUS Bulletin 1738-2, ``Rural Broadband Access Loan and Loan
Guarantee Advance and Construction Procedures Guide''.
(c) When reference is made in this part to existing RUS
regulations, an applicant or borrower under this part will follow the
requirements applicable to an RUS telecommunications borrower.
Sec. 1738.2 Definitions.
As used in this part:
Acquisition means the purchase of operating broadband facilities or
another broadband system whether by acquiring broadband facilities or
equipment, or majority stock interest of one or more organizations.
Administrator means the Administrator of the Rural Utilities
Service, or his or her designee.
Affiliate means an organization that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is
under common control with, the applicant.
Applicant means an eligible entity requesting approval of a loan or
loan guarantee under this part.
Borrower means any organization that has an outstanding loan made
or guaranteed by RUS.
Broadband pilot program means that program implemented through
Notices of Funds Availability, published in the Federal Register at 65
FR 75920 and at 67 FR 3140.
Broadband service means any technology identified by the
Administrator as having the capacity to transmit data to enable a
subscriber to the service to originate and receive high-quality voice,
data, graphics, and video. To qualify as broadband, the project must
offer data transmission services, and may provide voice, graphics,
video, and other services. At the beginning of each fiscal year, RUS
will publish a notice in the Federal Register defining the minimum
rate-of-data transmission criteria to qualify as broadband service
during that fiscal year's funding period.
Composite economic life means the weighted (by dollar amount of
each class of facility in the loan) average economic life of all
classes of facilities in the loan.
Economic life means the estimated useful service life of an asset
as determined by RUS.
Eligible rural community means any incorporated or unincorporated
place in the United States, its territories and insular possessions
(including any area within the Federated States of Micronesia, the
Republic of the Marshall Islands, and the Republic of Palau) that:
(1) Has no more than 20,000 inhabitants based on the most recent
available population statistics of the Bureau of the Census and
(2) Is not located in an area designated as a standard metropolitan
statistical area. For purposes of this part, ``place'' may include any
area located outside the boundaries of any incorporated or
unincorporated city, village or borough having a population exceeding
20,000 that is not within an area designated as a standard metropolitan
statistical area.
Feasibility study means the pro forma financial analysis prepared
by the applicant, and acceptable to RUS, to determine the economic
feasibility of a loan.
Fiscal year means the fiscal year of the federal government.
Forecast period means the time period beginning on the date (base
date) of the applicant's balance sheet used in preparing the
feasibility study and ending on a date equal to the base date plus the
number of years estimated in the feasibility study for completion of
the construction covered by the loan. Feasibility projections are
usually for 5 years.
Initial loan means the first loan made under section 601 of the RE
Act to each eligible entity.
Interim construction means the construction, improvement, or
acquisition of facilities and equipment prior to loan approval and
release of funds.
Interim financing means funding for a project that RUS has
acknowledged could be included in a loan prior to approving the loan.
Loan means any loan made or guaranteed under this part by RUS,
unless otherwise noted.
Loan contract means the loan agreement between RUS and the
borrower, including all amendments thereto.
Loan documents means the loan contract, note, and security
instrument between the borrower and RUS and any associated document
pertaining to a loan.
Loan funds means funds provided pursuant to a loan made or
guaranteed under this part by RUS.
Mortgage means the security document between the borrower, as
debtor, and RUS, as creditor, including any amendments and supplements
thereto.
Private loan guarantee means a loan made by a non-Federal lender
and guaranteed by RUS.
RE Act means the Rural Electrification Act of 1936, as amended (7
U.S.C. 901 et seq.).
Release of funds means a determination by RUS that an applicant has
complied with all of the conditions
[[Page 4688]]
prerequisite to the advance of funds as set forth in the loan contract.
RUS means the Rural Utilities Service, an agency of the United
States Department of Agriculture, and successor to the Rural
Electrification Administration.
RUS telecommunications borrower means any organization that has an
outstanding telecommunications loan made or guaranteed by RUS under
Titles II, III, or IV of the RE Act.
Service area means the geographical area within which the applicant
proposes to make broadband service available with a loan provided under
this part.
Telecommunications means the transmission and reception of voice,
data, sounds, signals, pictures, writings, or signs of all kinds, by
wire, fiber, radio, light, or other visual or electromagnetic means.
TIER means Times Interest Earned Ratio. TIER is the ratio of an
applicant's net income (after taxes) plus interest expense, all divided
by interest expense. For the purpose of this calculation, all amounts
will be annual figures and interest expense will include only interest
on debt with a maturity greater than one year.
Sec. Sec. 1738.3-1738.9 [Reserved]
Subpart B--Loan Purposes and Basic Policies
Sec. 1738.10 General.
(a) The purpose of the Rural Broadband Access Loan and Loan
Guarantee Program is to provide loans to provide funds, on a technology
neutral basis, for the costs of construction, improvement, and
acquisition of facilities and equipment for broadband service in
eligible rural communities.
(b) The proceeds of any loan made under this part may be used to
refinance an outstanding obligation on another telecommunications loan
made under the RE Act if the use of the proceeds will further the
construction, improvement, or acquisition of facilities in eligible
rural communities.
(1) Funds used for refinancing may not constitute more than 40
percent of the loan. The remainder of the proceeds shall only be used
for the construction or improvement of facilities and equipment for
broadband services.
(2) In calculating the expected composite economic life under Sec.
1738.41 of this part, the economic life of any loan refinanced under
this section will be based on the remaining economic life of the assets
underlying that loan.
(c) RUS will not assess fees or charges for any loan made under
this part.
(d) Loans will only be made under this part if the applicant's
financial operations, taking into account the impact of the facilities
financed with the proceeds of the loan and the associated debt, are
economically feasible, as determined by RUS.
Sec. 1738.11 Availability of broadband service.
(a) As provided in Sec. 1738.15 of this part, priority will be
given to loans to finance service to eligible rural communities in
which broadband service is not available to residential customers in
the applicant's proposed service area.
(b) RUS shall consider the following criteria in determining
whether broadband service is not available to residential customers:
(1) Broadband service is not being provided to residential
customers in the applicant's proposed service area and no entity is
committed to provide such service before the service would reasonably
be expected to be available pursuant to the loan application;
(2) Broadband service is not provided at rates comparable to those
of similar services in neighboring urban and suburban areas, as
determined by RUS; and
(3) The quality of existing service, including, but not limited to,
the availability of specified data rates, system latency, and data rate
restrictions, is not satisfactory as determined by RUS.
(c) All applicants, as part of submitting a completed application,
shall:
(1) Certify to RUS the extent to which paragraphs (b)(1) through
(b)(3) of this section, apply to residential customers in the proposed
service area, and
(2) Publish legal notice stating the applicant's intent to offer
broadband service in a particular community.
(i) The notice must set forth the applicant's proposed service
area, and request any incumbent broadband service provider to submit to
RUS within 30 days:
(A) The number of residential customers receiving broadband service
in the applicant's proposed service area, the rates of data
transmission, and the cost of each level of service, or proof of
commitment to provide service in the proposed service area, and
(B) A map of its service territory.
(ii) The notice must satisfy all other requirements to constitute
legal notice within the areas proposed to be served.
(iii) The notice must be published in state and local newspapers
covering the applicant's proposed service area if such publication is
not included in the legal notice requirement.
Sec. 1738.12 Location of facilities.
RUS will make broadband loans for facilities which RUS determines
are necessary to serve subscribers located in eligible rural
communities. RUS may determine that it is necessary for facilities
financed with loan funds to be located outside of eligible rural
communities.
Sec. 1738.13 Allocation of funds.
(a) On October 1, of each fiscal year, or as soon as possible after
funds become available, RUS will:
(1) Establish a national reserve for broadband loans, and
(2) Allocate amounts in the reserve to each State, territory, and
insular possession, based on the ratio of the number of communities
with a population of 2,500 inhabitants or less in the state, territory,
and insular possession to the number of communities with a population
of 2,500 inhabitants or less in all states, territories, and insular
possessions. Population will be based upon the Bureau of the Census'
latest decennial census.
(b) To be considered eligible for funding from the State reserve
during the fiscal year, an application, determined by RUS to be
complete, must be postmarked no later than January 31 of the fiscal
year.
(c) On April 1 of each fiscal year, RUS will return all unobligated
amounts in each state's reserve to the national reserve and will make
the national reserve available to eligible entities in any state.
(d) To be considered eligible for funding from the national reserve
during the current fiscal year, a completed application, satisfactory
to RUS, must be postmarked no later than July 31 of the fiscal year.
(e) Completed applications that are economically and technically
feasible, as determined by RUS, will be considered for funding in
accordance with the priority requirements set forth in Sec. 1738.15 of
this part.
Sec. 1738.14 One-time priority for unfunded applications from the
broadband pilot program.
(a) Each application that was submitted and remains unfunded from
the broadband pilot program will be given a one-time priority for
funding for a loan under this part.
(b) Each applicant will be given 30 days from the date of
publication of this part in the Federal Register to resubmit
[[Page 4689]]
a completed application in accordance with the provisions of this part.
(c) Completed applications submitted within the 30-day time-frame
will be considered for financing:
(1) First, where broadband service is not available to residential
customers, as set forth in Sec. 1738.11 of this part.
(i) Completed applications will be funded on a first-in, first-out
basis, as long as funds remain available in the applicable state's
reserve.
(ii) When the state reserve is not adequate to fund the next
completed application on a first-in, first-out basis, RUS will consider
subsequent completed applications for that state for funding on a
first-in, first-out basis. All unfunded, completed applications will be
carried forward for consideration for funding from the national
reserve.
(2) Second, where broadband service is available to residential
customers:
(i) On January 1, 2003, after all new applications submitted under
this part proposing to provide service where none is available have
been considered under Sec. 1738.15(b) of this part, all completed
applications will be considered for funding on a first-in, first-out
basis, as long as funds remain available in the applicable state's
reserve.
(ii) When the state reserve is not adequate to fund the next
completed application on a first-in, first-out basis, RUS will consider
subsequent completed applications for that state for funding on a
first-in, first-out basis. All unfunded, completed applications will be
carried forward for consideration for funding from the national
reserve.
Sec. 1738.15 Priorities.
Subject to the one-time priority set forth in Sec. 1738.14 of this
part, in making loans under this part, priority will be given to
eligible entities submitting completed applications for the
construction, improvement, or acquisition of facilities and equipment
for broadband service in eligible rural communities as follows:
(a) As of October 1 of the fiscal year, completed applications
remaining unfunded from the previous fiscal year where broadband
service is not available to residential customers, as set forth in
Sec. 1738.11(b)(1) of this part, will be considered for funding on a
first-in, first-out basis, as long as funds remain available in the
applicable state's reserve. When the state reserve is not adequate to
fund the next completed application on a first-in, first-out basis, RUS
will consider subsequent completed applications for that state for
funding on a first-in, first-out basis. All unfunded, completed
applications will be carried forward for consideration for funding from
the national reserve.
(b) New completed applications proposing to provide service where
none is available to residential customers, as set forth in Sec.
1738.11 of this part, will be considered for funding, from the state
reserve prior to April 1 and the national reserve after April 1, on a
first-in, first-out basis, as long as funds remain available. As
applications are processed using the first-in, first-out process, RUS
may expedite for consideration for funding applications proposing to
provide service where none is available, as set forth in Sec.
1738.11(b)(1). When funds are not adequate to fund the next completed
application on a first-in, first-out basis, RUS will consider
subsequent completed applications for funding on a first-in, first-out
basis.
(c) On January 1, March 30, April 1, July 1 and September 30 of the
fiscal year, all unfunded, completed applications on hand will be
prioritized and considered for funding, from the state reserve prior to
April 1 and the national reserve after April 1, as follows:
(1) First, where broadband service is not available to residential
customers, as set forth in Sec. 1738.11(b)(1) of this part, on a
first-in, first-out basis, as long as funds remain available.
(2) Second, where broadband service is not available to residential
customers, as set forth in Sec. 1738.11(b)(2) and (3) of this part, on
a first-in, first-out basis, as long as funds remain available.
(3) Third, where broadband service is available to residential
customers, on a first-in, first-out basis, so long as funds remain
available.
Sec. 1738.16 Eligible entities.
(a) RUS makes broadband loans to legally organized entities
providing, or proposing to provide, broadband services in eligible
rural communities.
(1) Types of eligible entities include cooperative, nonprofit,
limited dividend or mutual associations, limited liability companies,
commercial organizations and Indian tribes and tribal organizations as
defined in 25 U.S.C. 450b (b) and (c). Individuals or partnerships of
individuals are not eligible entities.
(2) An entity is not eligible if it serves more than 2 percent of
the telephone subscriber lines installed in the United States.
(3) To be eligible, an entity must have sufficient authority to
enter into a contract with RUS and to carry out the purposes of the
proposed loan.
(b) A State or local government, including any agency, subdivision,
or instrumentality thereof (including consortia thereof) shall be
eligible for a broadband loan only if, not later than April 30, 2003,
no other eligible entity is already offering or has committed to offer
broadband services to the eligible rural community. RUS will determine
whether the commitment is sufficient for purposes of this paragraph.
Sec. 1738.17 Civil rights.
Applicants are required to comply with certain regulations on
nondiscrimination and equal employment opportunity. See RUS Bulletin
1790-1, ``Nondiscrimination Among Beneficiaries of RUS Programs'' and
RUS Bulletin 20-15:320-15, ``Equal Employment Opportunity in
Construction Financed with RUS Loans''; 7 CFR parts 15 and 15b and 45
CFR part 90.
Sec. 1738.18 Minimum and maximum loan amount.
Recognizing plant costs, the applicant's cost of system design, and
RUS' administrative costs, RUS will not consider applications for loans
or loan guarantees of less than $100,000. Maximum loan amounts apply
only to an applicant for a direct 4-percent broadband loan, as provided
for in Sec. 1738.30(b)(2) of this part.
Sec. 1738.19 Facilities financed.
(a) RUS makes broadband loans to finance the construction,
improvement, and acquisition of facilities and equipment to provide
broadband service in eligible rural communities.
(b) RUS makes broadband loans to finance broadband facilities
leased under the terms of a capital lease as defined in generally
accepted accounting principles. RUS will not make a broadband loan to
finance facilities leased under the terms of an operating lease as
defined in generally accepted accounting principles.
(c) RUS makes broadband loans to finance an acquisition by an
eligible entity only when the acquisition is necessary and incidental
to furnishing or improving rural broadband service.
(d) RUS will not approve the use of broadband loans to acquire any
stock or any facilities or equipment of an affiliate of the applicant.
(e) RUS will not make a broadband loan to finance the following
items:
(1) Customer terminal equipment (including modems) not owned by the
applicant during its economic life and any associated inside wiring;
(2) Vehicles not used primarily in construction; and
(3) Operating expenses.
(f) RUS will not make a broadband loan to finance systems or
facilities that
[[Page 4690]]
have not been designed and constructed to RUS' satisfaction. See RUS'
Bulletins 1738-1 and 1738-2.
(g) Prior to October 1, 2004, RUS will not make a broadband loan
under this part to provide broadband service in an area receiving local
exchange telephone service from an RUS telecommunications borrower to
any entity other than the incumbent RUS telecommunications borrower if,
not later than 90 days after RUS receives an application proposing to
provide broadband service in the borrower's local exchange service
territory, the incumbent RUS telecommunications borrower submits to RUS
a letter of intent to provide or begin to construct residential
broadband service in its local exchange service territory prior to
October 1, 2004. The incumbent RUS telecommunications borrower must
provide, prior to October 1, 2004, support of their intent to provide
broadband service through submitting either a loan application to
construct broadband facilities or proof that construction of broadband
facilities has begun. Thereafter, unless the RUS telecommunications
borrower has constructed or begun to construct broadband facilities in
its service area, RUS will consider an application for a loan under
this part to provide the broadband service in an area served by an RUS
telecommunications borrower according to the criteria for determining
broadband availability in Sec. 1738.11(b) of this part.
(h) RUS will not approve loans to more than one applicant to
provide broadband service within the same eligible rural community, nor
to an applicant proposing to provide service in a community served by a
borrower using funds under this part regardless of the definition of
broadband service at the time of loan approval.
(i) If an unadvanced loan, or a portion thereof, is rescinded, a
new loan shall not be made to the same applicant for the same purposes
as in the rescinded loan.
Sec. 1738.20 Credit support requirement.
(a) To be eligible for a loan, RUS will require an applicant to
provide credit support in an amount equal to 20 percent of the
requested loan amount.
(b) The applicant must have, as part of the minimum 20 percent
requirement, cash or, in the case of State and local governments, cash
equivalents in an amount equal to operating expenses for the first full
year of providing service, as determined by a feasibility study
satisfactory to RUS. This cash requirement will be waived for
applicants operating as telecommunications companies which have
positive cash flow for the two calendar years immediately preceding the
date of application.
(c) The remainder of the minimum requirement can be met by
undepreciated assets which would normally be financed as part of a loan
under this part, additional cash or cash equivalents, licenses, or an
unconditional letter of credit, or the equivalent, satisfactory to RUS.
(d) For purposes of this section, assets and licenses will be
valued based on the lower of cost or market value, net of liens or
other obligations of payments for those assets and licenses.
Sec. 1738.21 Interim financing.
(a) Upon notification by RUS that an applicant's application is
considered complete, the applicant may enter into an interim financing
agreement with a lender other than RUS or use its own internally
generated funds for interim construction.
(b) For an applicant to preserve the option of obtaining loan funds
for reimbursement of interim financing, the following procedures must
be followed:
(1) Interim construction shall be conducted in accordance with RUS
Bulletin 1738-2 and 7 CFR part 1788, except that the applicant shall
not begin interim construction until all necessary licenses, permits,
and other governmental approvals have been obtained;
(2) Equal employment opportunity requirements apply to interim
construction. See RUS Bulletin 20-15: 320-15; and
(3) Interim construction shall be covered by an Environmental
Report prepared in accordance with 7 CFR part 1794 and approved by RUS.
(c) RUS approval of interim financing is not a commitment that RUS
will make loan funds available.
Sec. 1738.22 Loan security.
(a) RUS makes loans only if, in the judgment of the Administrator,
the security therefore is reasonably adequate and the loan will be
repaid within the time agreed.
(b) RUS generally requires that an applicant provide RUS with a
first lien, in form and substance satisfactory to RUS, on all of the
applicant's property and such additional security as RUS may require.
If necessary, RUS will share in the first lien with another lender
provided the RUS loan is adequately secured and will be repaid within
the time agreed.
(c) Unless otherwise approved by RUS, the applicant shall purchase
and own the collateral for the loan free from liens or security
interests, other than those securing the RUS loan.
(d) In the case of loans that include the financing of broadband
facilities that do not constitute self-contained operating systems or
units, the applicant shall, in addition to the mortgage lien on all of
the applicant's facilities financed by RUS, furnish adequate assurance,
in the form of contractual or other arrangements, satisfactory to RUS,
that continuous and efficient broadband service will be rendered.
(e) Beginning with the first calendar year following the end of the
forecast period, RUS will require the recipient of a broadband loan to
maintain, at a minimum, a TIER at least equal to the projected TIER
determined by the feasibility study prepared in connection with the
loan, but at least 1.25 and not greater than 2.0.
(f) Additional financial, investment, operational, and managerial
controls appear in the loan documents required by RUS.
Sec. Sec. 1738.23--1738.29 [Reserved]
Subpart C--Types of Loans
Sec. 1738.30 Rural broadband access loans and loan guarantees.
(a) Direct cost-of-money broadband loans shall bear interest at a
rate (the ``Cost of Money Interest Rate'') equal to the cost of
borrowing to the Department of Treasury for obligations of comparable
maturity. The Cost of Money Interest Rate will be provided by RUS when
the funds are advanced to the borrower.
(b) Direct 4 percent broadband loan.
(1) To be eligible for a direct loan bearing an interest rate of 4
percent, the applicant must be proposing to serve:
(i) A community that:
(A) Has a population of less than 2,500 inhabitants;
(B) Is not currently receiving broadband service as set forth in
Sec. 1738.11(b)(1) of this part, and
(C) Is located in a county with per capita personal income that is
less than or equal to that percent of the national average per capita
personal income which RUS will publish in the Federal Register at the
beginning of each fiscal year. County per capita personal income as a
percent of the national average per capita personal income is published
by the Bureau of Economic Analysis, U.S. Department of Commerce, at
http://www.bea.doc.gov/bea/regional/reis/. RUS will use the most recent
statistics published on October 1 of the fiscal year in which the
application is deemed complete by RUS; and
(ii) A service area with a certain maximum population density,
[[Page 4691]]
calculated as the total number of persons in the service area divided
by the square miles of the service area. The maximum population density
requirement will be published by RUS in the Federal Register at the
beginning of each fiscal year.
(2) The total amount of financing made available by RUS, in each
fiscal year, for direct loans bearing an interest rate of 4 percent and
the maximum of any one loan will be published by RUS in the Federal
Register at the beginning of each fiscal year.
(3) When an approved application exceeds the maximum amount of 4
percent financing that may be made available to the borrower, a direct
loan made at 4 percent may be made simultaneously with a ``Cost-of-
Money Interest Rate'' loan.
(4) A 4 percent direct loan may be made simultaneously with a Cost-
of-Money Interest Rate loan or a private loan guarantee.
(c) Private loan guarantees. A private loan guarantee shall bear
interest at a rate set by the lender consistent with the current
applicable market rate for a loan of comparable maturity.
(1) A private loan guarantee is available to any legally organized
lending agency which includes commercial banks, trust companies,
mortgage banking firms, insurance companies, and any other
institutional investor authorized by law to loan money, hereafter
referred to as ``lender''. At the time of application, applicants must
provide RUS the name of the lender who will be providing the funding
and a commitment from that lender to provide the funds.
(i) The lender shall be subject to credit examination and
supervision by a Federal or state agency unless RUS determines that
alternative examination and supervisory mechanisms are adequate.
(ii) The lender shall demonstrate to RUS the capability to
adequately service guaranteed loans. The lender shall also be in good
standing with its licensing authority and meet the loan making, loan
servicing, and other requirements of the jurisdiction in which the
lender makes loans guaranteed under this part.
(2) The lender selected by the borrower shall provide evidence
satisfactory to RUS of its qualification under this part, along with
the name of the authority that supervises such lender.
(3) The lender may establish charges and fees for the loan provided
they are not greater than those normally charged other applicants for
the same type of loan in the ordinary course of business. RUS will not
guarantee any portion of the loan used to pay lender charges and fees.
(4) Loans are guaranteed for no more than 80 percent of the amount
of principal except for those purposes in Sec. 1738.30(c)(3) of this
part for which RUS will not provide a guarantee. RUS' guarantee is
limited to the loan repayment obligation of the borrower and does not
extend to guaranteeing that a lender will remit to a holder loan
payments made by the borrower.
(5) The interest rate must be fixed and must be the same for the
Guaranteed Loan Amount or the respective Guaranteed Loan Portion Amount
or the respective Guaranteed-Amount Equivalent, as the case may be, and
Unguaranteed Loan Amount or the respective Unguaranteed Loan Portion
Amount or the respective Unguaranteed-Amount Equivalent, as the case
may be.
(6) The entire loan will be secured by the same security with equal
lien priority for the Guaranteed Loan Amount or the respective
Guaranteed Loan Portion Amount or the respective Guaranteed-Amount
Equivalent, as the case may be, and Unguaranteed Loan Amount or the
respective Unguaranteed Loan Portion Amount or the respective
Unguaranteed-Amount Equivalent, as the case may be. The Unguaranteed
Loan Amount or the respective Unguaranteed Loan Portion Amount or the
respective Unguaranteed-Amount Equivalent, as the case may be, will
neither be paid first nor given any preference or priority over the
Guaranteed Loan Amount or the respective Guaranteed Loan Portion Amount
or the respective Guaranteed-Amount Equivalent, as the case may be.
(7) All loan documents, including, but not limited to, a loan
guarantee agreement between RUS and the lender, the loan note
guarantee, the guaranteed loan note, and the mortgage will be prepared
by RUS. Contact RUS for copies of forms of the loan documents. The
guaranteed loan agreement between the borrower and the lender shall be
subject to RUS approval.
(8) Once a private loan guarantee is approved, the lender will be
required to fully service the loan including:
(i) Determining that all prerequisites to each advance of loan
funds by the lender under the terms of the contract of guarantee, all
financing documents, and all related security documents have been
fulfilled. The lender must obtain RUS approval to advance funds prior
to each advance of funds.
(ii) Billing and collecting loan payments from the borrower.
(iii) Notifying the Administrator promptly of any default in the
payment of principal and interest on the loan and submit a report, as
soon thereafter as possible, setting forth its views as to the reasons
for the default, how long it expects the borrower will be in default,
and what corrective actions the borrower states it is taking to achieve
a current debt service position.
(iv) Notifying the Administrator of any known violations or
defaults by the borrower under the lending agreement, contract of
guarantee, or related security instruments, or conditions of which the
lender is aware which might lead to nonpayment, violation, or other
default.
(9) Upon notice to the lender, RUS may assume loan servicing
responsibilities for the loan or the Guaranteed Loan Amount or the
respective Guaranteed Loan Portion Amount or the respective Guaranteed-
Amount Equivalent, as the case may be, or require the lender to assign
such responsibilities to a different entity, if the lender fails to
perform its loan servicing responsibilities under the loan guarantee
agreement, or if the lender becomes insolvent, makes an admission in
writing of its inability to pay its debts generally as they become due,
or becomes the subject of proceedings commenced under the Bankruptcy
Reform Act of 1978 (11 U.S.C. 101 et seq.) or any similar applicable
Federal or state law, or is no longer in good standing with its
licensing authority, or ceases to meet the eligibility requirements of
this section. Such negligent servicing is defined as the failure to
perform those services which a reasonable prudent lender would perform
in servicing its own portfolio of loans that are not guaranteed, and
includes not only a failure to act but also not acting in a timely
manner.
(10)(i) The Guarantee shall cease to be effective with respect to
any Guaranteed Loan Amount or any Guaranteed Loan Portion Amount or any
Guaranteed-Amount Equivalent to the extent that:
(A) The Guaranteed Loan Amount or the respective Guaranteed Loan
Portion Amount or the respective Guaranteed-Amount Equivalent, as the
case may be, is separated at any time from the Unguaranteed Loan Amount
or the respective Unguaranteed Loan Portion Amount or the respective
Unguaranteed-Amount Equivalent, as the case may be, in any way,
directly or through the issuance of any Guaranteed-Amount Equity
Derivative or any Guaranteed-Amount Debt Derivative; or
(B) Any holder of the Guaranteed Loan Note or any Guaranteed Loan
Portion Note or any Derivative, as the case may be, having a claim to
payments on the Guaranteed Loan receives more than its pro-rata
percentage of any
[[Page 4692]]
payment due to such holder from payments made under the Guarantee at
any time during the term of the Guaranteed Loan.
(ii) The assignment by the lender requires prior written approval
from RUS.
(iii) The assignment shall entitle the holder to all of the
lender's rights. However, the lender shall remain responsible for
servicing the entire loan.
(iv) The borrower, its principal officers, members of the
borrower's board of directors and members of the immediate families of
said officials shall not be a holder of the borrower's loan.
(11) RUS will not guarantee any loan under this subpart that
provides for:
(i) A balloon payment of principal or interest at the final
maturity date of the loan; or
(ii) The payment of interest on interest.
(12) For purposes of this subsection:
(i) Derivative means any right, interest, instrument or security
issued or traded on the credit of the Guaranteed Loan or any Guaranteed
Loan Portion, including but not limited to:
(A) Any participation share of, or undivided ownership or other
equity interest in, the Guaranteed Loan or any Guaranteed Loan Portion;
(B) Any note, bond or other debt instrument or obligation which is
collateralized or otherwise secured by a pledge of, or security
interest in, the Guaranteed Loan or any Guaranteed Loan Portion; or
(C) Any such interest in such an interest or any such instrument
secured by such an instrument.
(ii) Guaranteed-Amount Debt Derivative means any note, bond or
other debt instrument or obligation which is collateralized or
otherwise secured by a pledge of, or security interest in, the
Guaranteed Loan Note or any Guaranteed Loan Portion Note or any
Derivative, as the case may be, which has an exclusive or preferred
claim to the Guaranteed Loan Amount or the respective Guaranteed Loan
Portion Amount or the respective Guaranteed-Amount Equivalent, as the
case may be.
(iii) Guaranteed-Amount Equity Derivative means any participation
share of, or undivided ownership or other equity interest in, the
Guaranteed Loan or any Guaranteed Loan Portion or any Derivative, as
the case may be, which has an exclusive or preferred claim to the
Guaranteed Loan Amount or the respective Guaranteed Loan Portion Amount
or the respective Guaranteed-Amount Equivalent, as the case may be.
(iv) Guaranteed-Amount Equivalent means:
(A) With respect to any Derivative which is equal in principal
amount to the Guaranteed Loan or any Guaranteed Loan Portion, that
amount of payment on account of such Derivative which is equal to the
Guaranteed Loan Amount or the respective Guaranteed Loan Portion
Amount, as the case may be; or
(B) With respect to any Derivatives which in the aggregate are
equal in principal amount to the Guaranteed Loan or any Guaranteed Loan
Portion, that amount of payment on account of such derivatives which is
equal to the Guaranteed Loan Amount or the respective Guaranteed Loan
Portion Amount, as the case may be.
(v) Guaranteed Loan Amount means that amount of payment on account
of the Guaranteed Loan which is guaranteed under the terms of the
Guarantee.
(vi) Guaranteed Loan Portion Amount means that amount of payment on
account of any Guaranteed Loan Portion which is guaranteed under the
terms of the Guarantee.
(vii) Guaranteed Loan Note means, collectively, the note or notes
executed and delivered by the Borrower to evidence the Guaranteed Loan.
(viii) Guaranteed Loan Portion means any portion of the Guaranteed
Loan.
(ix) Guaranteed Loan Portion Note means any note executed and
delivered by the Borrower to evidence a Guaranteed Loan Portion.
(x) Unguaranteed-amount equivalent means all amounts of payment on
account of any Derivative other than the respective Guaranteed-Amount
Equivalent.
(xi) Unguaranteed loan amount means all amounts of payment on
account of the Guaranteed Loan other than the Guaranteed Amount.
(xii) Unguaranteed loan portion Amount means all amounts of payment
on account of any Guaranteed Loan Portion other than the respective
Guaranteed Loan Portion Amount.
Sec. 1738.31 Full faith and credit.
Loan guarantees made under this part are supported by the full
faith and credit of the United States.
Sec. Sec. 1738.32--1738.39 [Reserved]
Subpart D--Terms of Loans
Sec. 1738.40 General.
Terms and conditions of loans are set forth in a mortgage, note,
and loan contract. Provisions of the mortgage and loan contract are
implemented by provisions in RUS bulletins and regulations. Standard
forms of the mortgage, note, and loan contract can be obtained from
RUS. However, RUS reserves the right to establish terms and conditions,
including security requirements, on a case-by-case basis.
Sec. 1738.41 Payments on loans.
(a) Broadband loans must be repaid with interest within a period
that, rounded to the nearest whole year, equals the expected composite
economic life of the facilities to be financed, as calculated by RUS.
(1) The expected composite economic life shall be based upon the
depreciation rates for the facilities financed by the loan.
(2) The depreciation rates used shall be the rates currently in
place, as long as RUS finds them to be reasonable for the
telecommunications industry.
(b) Applicants may request a repayment period that is shorter than
the expected composite economic life of the facilities financed. A
shorter period may be approved as long as the Administrator determines
that the loan remains feasible.
(c) Interest is payable on funds advanced each month as it accrues
beginning with the first billing after the advance, as defined in the
note. Principal payments on each note are scheduled to begin one year
after the date of the first advance. After this deferral period,
interest and principal payments on all funds advanced during this one-
year period shall be made in equal monthly installments. Principal
payments on funds advanced 1 year or more after the date of the first
advance will begin with the first billing after the advance. The
interest and principal payments on each of these advances shall be made
in equal monthly installments.
Sec. Sec. 1738.42--1738.49 [Reserved]
Dated: January 27, 2003.
Hilda Gay Legg,
Administrator, Rural Utilities Service.
[FR Doc. 03-2199 Filed 1-29-03; 8:45 am]
BILLING CODE 3410-15-P