7 U.S.C. § 948 : US Code - Section 948: Lending power

Search 7 U.S.C. § 948 : US Code - Section 948: Lending power

(a) Loans for prescribed purposes; requisite conditions
The Governor of the telephone bank shall make loans on behalf of
the telephone bank, to the extent that there are qualifying
applications therefor, subject only to limitations as to amounts
authorized for loans and advances as may be imposed by law enacted
by the Congress of the United States for loans to be made in any
one year, and in conformance with policies approved by the
Telephone Bank Board, to corporations and public bodies which have
received a loan or loan commitment pursuant to section 922 of this
title, or which have been certified by the Secretary to be eligible
for such a loan or loan commitment, (1) for the same purposes and
under the same limitations for which loans may be made under
section 922 of this title, (2) for the acquisition, purchase, and
installation of telephone lines, systems, and facilities (other
than buildings used primarily for administrative purposes, vehicles
not used primarily in construction, and customer premise equipment)
related to the furnishing, improvement, or extension of rural
telecommunications service, and (3) for the purchase of class B
stock required to be purchased under section 946(d) of this title
but not for the purchase of class C stock, subject, as to the
purposes set forth in (2) hereof, to the following provisos: That
in the case of any such loan for the acquisition of telephone
lines, facilities, or systems, the acquisition shall be approved by
the Secretary, the location and character thereof shall be such as
to improve the efficiency, effectiveness, or financial stability of
the telephone system of the borrower, and in respect of exchange
facilities for local services, the size of each acquisition shall
not be greater than the borrower's existing system at the time it
receives its first loan from the telephone bank, taking into
account the number of subscribers served, miles of line, and plant
investment. Loans and advances made under this section shall not be
included in the totals of the budget of the United States
Government and shall be exempt from any general limitation imposed
by statute on expenditures and net lending (budget outlays) of the
United States.
(b) Terms and conditions of loans; restrictions on loans
Loans under this section shall be on such terms and conditions as
the Governor of the telephone bank shall determine, subject,
however, to the following restrictions:
(1) Amortization period
All loans made under this section shall be fully amortized over
a period not to exceed fifty years.
(2) Preference in loans; election of loans for telephone system
with certain subscriber density per mile
Funds to be loaned under this chapter to any borrower shall be
loaned under this section in preference to section 922 of this
title if the borrower is eligible for such a loan and funds are
available therefor. Notwithstanding the foregoing or any other
provision of law, all loans made pursuant to this chapter for
facilities for telephone systems with an average subscriber
density of three or fewer per mile shall be made under section
922 of this title; but this provision shall not preclude the
making of such loans from the telephone bank at the election of
the borrower.
(3) Interest rate
(A) Loans under this section shall bear interest at the "cost
of money rate". The cost of money rate is defined as the average
cost of moneys to the telephone bank as determined by the
Governor, but not less than 5 per centum per annum.
(B) On and after December 22, 1987, advances made on or after
December 22, 1987, under loan commitments made on or after
October 1, 1987, shall bear interest at the rate determined under
subparagraph (C), but in no event at a rate that is less than 5
percent per annum.
(C) The rate determined under this subparagraph shall be - 
(i) for the period beginning on the date the advance is made
and ending at the close of the fiscal year in which the advance
is made, the average yield (on the date of the advance) on
outstanding marketable obligations of the United States having
a final maturity comparable to the final maturity of the
advance; and
(ii) after the fiscal year in which the advance is made, the
cost of money rate for such fiscal year, as determined under
subparagraph (D).
(D) Within 30 days after the end of each fiscal year, the
Governor shall determine to the nearest 0.01 percent the cost of
money rate for the fiscal year, by calculating the sum of the
results of the following calculations:
(i) The aggregate of all amounts received by the telephone
bank during the fiscal year from the issuance of class A stock,
multiplied by the rate of return payable by the telephone bank
during the fiscal year, as specified in section 946(c) of this
title, to holders of class A stock, which product is divided by
the aggregate of the amounts advanced by the telephone bank
during the fiscal year.
(ii) The aggregate of all amounts received by the telephone
bank during the fiscal year from the issuance of class B stock,
multiplied by the rate at which dividends are payable by the
telephone bank during the fiscal year, as specified in section
946(d) of this title, to holders of class B stock, which
product is divided by the aggregate of the amounts advanced by
the telephone bank during the fiscal year. For purposes of the
calculation under this subparagraph, such rate shall be zero.
(iii) The aggregate of all amounts received by the telephone
bank during the fiscal year from the issuance of class C stock,
multiplied by the rate at which dividends are payable by the
telephone bank during the fiscal year, under section 946(e) of
this title, to holders of class C stock, which product is
divided by the aggregate of the amounts advanced by the
telephone bank during the fiscal year.
(iv)(I) The sum of the results of the calculations described
in subclause (II).
(II) The amounts received by the telephone bank during the
fiscal year from each issue of telephone debentures and other
obligations of the telephone bank, multiplied, respectively, by
the rates at which interest is payable during the fiscal year
by the telephone bank to holders of each issue, each of which
products is divided, respectively, by the aggregate of the
amounts advanced by the telephone bank during the fiscal year.
(v)(I) The amount by which the aggregate of the amounts
advanced by the telephone bank during the fiscal year exceeds
the aggregate of the amounts received by the telephone bank
from the issuance of class A stock, class B stock, class C
stock, and telephone debentures and other obligations of the
telephone bank during the fiscal year, multiplied by the
historic cost of money rate as of the close of the fiscal year
immediately preceding the fiscal year, which product is divided
by the aggregate of the amounts advanced by the telephone bank
during the fiscal year.
(II) For purposes of this clause, the term "historic cost of
money rate", with respect to the close of a preceding fiscal
year, means the sum of the results of the following
calculations: The amounts advanced by the telephone bank in
each fiscal year during the period beginning with fiscal year
1974 and ending with the preceding fiscal year, multiplied,
respectively, by the cost of money rate for the fiscal year (as
set forth in the table in subparagraph (E)) for fiscal years
1974 through 1987, and as determined by the Governor under this
subparagraph for fiscal years after fiscal year 1987), each of
which products is divided, respectively, by the aggregate of
the amounts advanced by the telephone bank during the period.
(E) For purposes of subparagraph (D)(II), the cost of money
rate for the fiscal years in which each advance was made shall be
as set forth in the following table:
The cost of money       
For advances made in -                       rate shall be -         
Fiscal year 1974                              5.01 percent          
Fiscal year 1975                              5.85 percent          
Fiscal year 1976                              5.33 percent          
Fiscal year 1977                              5.00 percent          
Fiscal year 1978                              5.87 percent          
Fiscal year 1979                              5.93 percent          
Fiscal year 1980                              8.10 percent          
Fiscal year 1981                              9.46 percent          
Fiscal year 1982                              8.39 percent          
Fiscal year 1983                              6.99 percent          
Fiscal year 1984                              6.55 percent          
Fiscal year 1985                              5.00 percent          
Fiscal year 1986                              5.00 percent          
Fiscal year 1987                              5.00 percent.         
For purposes of this paragraph, the term "fiscal year" means the
12-month period ending on September 30 of the designated year.
(F)(i) Notwithstanding subparagraph (B), if a borrower holds a
commitment for a loan under this section made on or after October
1, 1987, and before December 22, 1987, part or all of the
proceeds of which have not been advanced as of December 22, 1987,
the borrower may, until the later of the date the next advance
under the loan commitment is made or 90 days after December 22,
1987, elect to have the interest rate specified in the loan
commitment apply to the unadvanced portion of the loan in lieu of
the rate which (but for this clause) would apply to the
unadvanced portion under this paragraph. If any borrower makes an
election under this clause with respect to a loan, the Governor
shall adjust the interest rate which applies to the unadvanced
portion of the loan accordingly.
(ii)(I) If the telephone bank, pursuant to section 947(b) of
this title, issues telephone debentures on any date to refinance
telephone debentures or other obligations of the telephone bank,
the telephone bank shall, in addition to any interest rate
reduction required by any other provision of this paragraph, for
the period applicable to the advance, reduce the interest rate
charged on each advance made under this section during the fiscal
year in which the refinanced debentures or other obligations were
originally issued by the amount applicable to the advance.
(II) For purposes of subclause (I), the term "the period
applicable to the advance" means the period beginning on the
issue date described in subclause (I) and ending on the earlier
of the date the advance matures or is completely prepaid.
(III) For purposes of subclause (I), the term "the amount
applicable to the advance" means an amount which fully reflects
that percentage of the funds saved by the telephone bank as a
result of the refinancing which is equal to the percentage
representation of the advance in all advances described in
subclause (I).
(IV) Within 60 days after any issue date described in subclause
(I), the Governor shall amend the loan documentation for each
advance described in subclause (I), as necessary, to reflect any
interest rate reduction applicable to the advance by reason of
this clause, and shall notify each affected borrower of the
reduction.
(G) Within 30 days after the publication of any determination
made under subparagraph (D), any affected borrower may obtain
review of the determination, or any other equitable relief as may
be determined appropriate, by the United States court of appeals
for the judicial circuit in which the borrower does business by
filing a written petition requesting the court to set aside or
modify such determination. On receipt of such a petition, the
clerk of the court shall transmit a copy of the petition to the
Governor. On receipt of a copy of such a petition from the clerk
of the court, the Governor shall file with the court the record
on which the determination is based. The court shall have
jurisdiction to affirm, set aside, or modify the determination.
(H) Within 5 days after determining the cost of money rate for
a fiscal year, the Governor shall - 
(i) cause the determination to be published in the Federal
Register in accordance with section 552 of title 5; and
(ii) furnish a copy of the determination to the Comptroller
General of the United States.
(I) The telephone bank shall not sell or otherwise dispose of
any loan made under this section, except as provided in this
paragraph.
(4) Required qualifications of applicants
The Governor of the telephone bank may make a loan under this
section only to an applicant for the loan who meets the following
requirements:
(A) The average number of subscribers per mile of line in the
service area of the applicant is not more than 15, or the
applicant is capable of producing net income or margins before
interest of not less than 100 percent (but not more than 500
percent) of the interest requirements on all of the outstanding
and proposed loans of the applicant.
(B) The Secretary has approved, under section 935(d)(3) of
this title, a telecommunications modernization plan for the
State in which the applicant is located and, if the plan was
developed by telephone borrowers under subchapter III of this
chapter, the applicant is a participant in the plan.
(5) Certificate of convenience and necessity required from State
regulatory agency or statement of telephone bank's Governor of
nonduplication of lines, facilities, or systems
No loan shall be made in any State which now has or may
hereafter have a State regulatory body having authority to
regulate telephone service and to require certificates of
convenience and necessity to the applicant unless such
certificate from such agency is first obtained. In a State in
which there is no such agency or regulatory body legally
authorized to issue such certificates to the applicant, no loan
shall be made under this section unless the Governor of the
telephone bank shall determine (and set forth his reasons
therefor in writing) that no duplication of lines, facilities, or
systems, providing reasonably adequate services will result
therefrom.
(6) Definitions: telephone service; telephone lines, facilities,
or systems
As used in this section, the term telephone service shall have
the meaning prescribed for this term in section 924(a) of this
title, and the term telephone lines, facilities, or systems shall
mean lines, facilities, or systems used in the rendition of such
telephone service.
(7) Sale or disposal of property, rights, or franchises prior to
repayment of loan
No borrower of funds under this section shall, without approval
of the Governor of the telephone bank under rules established by
the Telephone Bank Board, sell or dispose of its property,
rights, or franchises, acquired under the provisions of this
chapter, until any loan obtained from the telephone bank,
including all interest and charges, shall have been repaid.
(8) Prepayment without penalty
(A) A borrower with a loan from the Rural Telephone Bank may
prepay such loan (or any part thereof) by paying the face amount
thereof without being required to pay the prepayment penalty set
forth in the note covering such loan, except for any prepayment
penalty provided for in a loan agreement entered into before
November 1, 1993.
(B) If a borrower prepays part or all of a loan made under this
section, then, notwithstanding section 947(b) of this title, the
Governor of the telephone bank shall - 
(i) use the full amount of the prepayment to repay
obligations of the telephone bank issued pursuant to section
947(b) of this title before October 1, 1991, to the extent any
such obligations are outstanding; and
(ii) in repaying the obligations, first repay the advances
bearing the greatest rate of interest.
(9) Applications considered under this section and section
935(d)(2)
On request of any applicant for a loan under this section
during any fiscal year, the Governor of the telephone bank shall -

(A) consider the application to be for a loan under this
section and a loan under section 935(d)(2) of this title; and
(B) if the applicant is eligible for a loan, make a loan to
the applicant under this section in an amount equal to the
amount that bears the same ratio to the total amount of loans
for which the applicant is eligible under this section and
under section 935(d)(2) of this title, as the amount made
available for loans under this section for the fiscal year
bears to the total amount made available for loans under this
section and under section 935(d)(2) of this title for the
fiscal year.
(10) Applications considered under section 935(d)(2)
On request of any applicant who is eligible for a loan under
this section for which funds are not available, the applicant
shall be considered to have applied for a loan under section
935(d)(2) of this title.
(c) Payment schedule; adjustment; loan period
The Governor of the telephone bank is authorized under rules
established by the Telephone Bank Board to adjust, on an amortized
basis, the schedule of payments of interest or principal of loans
made under this section upon his determination that with such
readjustment there is reasonable assurance of repayment: Provided,
however, That no adjustment shall extend the period of such loans
beyond fifty years.
(d) Borrowers to determine amortization period for rural telephone
bank loans
(1) Except as provided in paragraph (2), the term of any loan
made under this subchapter shall be determined by the borrower at
the time the application for the loan is submitted.
(2) The term of any loan made under this subchapter shall not
exceed the maximum term for which a loan may be made under section
904 of this title.
(e) Interest on loans and advances
Loans and advances made under this section on or after November
5, 1990, shall bear interest at a rate determined under this
section, taking into account all assets and liabilities of the
telephone bank. This subsection shall not apply to loans obligated
before November 1, 1993. Funds are not authorized to be
appropriated to carry out this subsection until the funds are
appropriated in advance to carry out this subsection.