§ 936b. — Sale or prepayment of direct or insured loans.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 7USC936b]
TITLE 7--AGRICULTURE
CHAPTER 31--RURAL ELECTRIFICATION AND TELEPHONE SERVICE
SUBCHAPTER III--RURAL ELECTRIC AND TELEPHONE DIRECT LOAN PROGRAMS
Sec. 936b. Sale or prepayment of direct or insured loans
(a) Discounted prepayment by borrowers of electric loans
(1) In general
Except as provided in paragraph (2), a direct or insured loan
made under this chapter shall not be sold or prepaid at a value that
is less than the outstanding principal balance on the loan.
(2) Exception
On request of the borrower, an electric loan made under this
chapter, or a portion of such a loan, that was advanced before May
1, 1992, or has been advanced for not less than 2 years, shall be
sold to or prepaid by the borrower at the lesser of--
(A) the outstanding principal balance on the loan; or
(B) the present value of the loan discounted from the face
value at maturity at the rate established by the Secretary.
(3) Discount rate
The discount rate applicable to the prepayment under this
subsection of a loan or loan advance shall be the then current cost
of funds to the Department of the Treasury for obligations of
comparable maturity to the remaining term of the loan.
(4) Tax exempt financing
If a borrower prepays a loan under this subsection using tax
exempt financing, the discount shall be adjusted to ensure that the
borrower receives a benefit that is equal to the benefit the
borrower would receive if the borrower used fully taxable financing.
The borrower shall certify in writing whether the financing will be
tax exempt and shall comply with such other terms and conditions as
the Secretary may establish that are reasonable and necessary to
carry out this subsection.
(5) Eligibility
(A) In general
A borrower that has prepaid an insured or direct loan shall
under this chapter in the same manner as other borrowers, except
that--
(i) a borrower that has prepaid a loan, either before or
after October 21, 1992, at a discount rate as provided by
paragraph (3), shall not be eligible, except at the
discretion of the Secretary, to apply for or receive direct
or insured loans under this chapter during the 120-month
period beginning on the date of the prepayment; and
(ii) a borrower that prepaid a loan before October 21,
1992, at a discount rate greater than that provided by
paragraph (3), shall not be eligible--
(I) except at the discretion of the Secretary, to
apply for or receive direct or insured loans described
in clause (i) during the 180-month period beginning on
the date of the prepayment; or
(II) to apply for or receive direct or insured loans
described in clause (i) until the borrower has repaid to
the Federal Government the sum of--
(aa) the amount (if any) by which the discount
the borrower received by reason of the prepayment
exceeds the discount the borrower would have
received had the discount been based on the cost of
funds to the Department of the Treasury at the time
of the prepayment; and
(bb) interest on the amount described in item
(aa), for the period beginning on the date of the
prepayment and ending on the date of the repayment,
at a rate equal to the average annual cost of
borrowing by the Department of the Treasury.
(B) Effect on existing agreements
If a borrower and the Secretary have entered into an
agreement with respect to a prepayment occurring before October
21, 1992, this paragraph shall supersede any provision in the
agreement relating to the restoration of eligibility for loans
under this chapter.
(C) Distribution borrowers
A distribution borrower not in default on the repayment of
loans made or insured under this chapter shall be eligible for
discounted prepayment as provided in this subsection. For the
purpose of determining eligibility for discounted prepayment
under this subsection or eligibility for assistance under this
chapter, a default by a borrower from which a distribution
borrower purchases wholesale power shall not be considered a
default by the distribution borrower.
(6) Definitions
As used in this subsection:
(A) Direct loan
The term ``direct loan'' means a loan made under section 904
of this title.
(B) Insured loan
The term ``insured loan'' means a loan made under section
935 of this title.
(b) Mergers of electric borrowers
Notwithstanding subsection (a) of this section, a direct or insured
loan may be prepaid by an electric borrower at the lesser of the
outstanding principal balance due thereon or the present value thereof
discounted from the face value at maturity at the rate set by the
Secretary if the borrower is an electrical organization which resulted
from a merger or consolidation between a borrower and an organization
which, prior to October 1, 1987, prepaid its direct or insured loans
pursuant to this section. Prepayments by a borrower hereunder shall be
made not later than one year after the effective date of the merger,
consolidation, or other transaction. The discount rate to be set by the
Secretary for direct or insured loans prepayments hereunder shall be
based on the current cost of funds to the Department of the Treasury for
obligations of comparable maturity to those being prepaid. If a borrower
prepays using tax exempt financing, the discount shall be adjusted to
make the discount equivalent to fully taxable financing. The borrower
shall certify in writing whether the financing will be tax exempt and
shall comply with such other terms and conditions as the Secretary may
establish which are reasonable and necessary to implement this
provision. As used in this section, the term ``direct loan'' means a
loan made under section 904 of this title.
(May 20, 1936, ch. 432, title III, Sec. 306B, as added Pub. L. 99-509,
title I, Sec. 1011(a), Oct. 21, 1986, 100 Stat. 1876; amended Pub. L.
101-624, title XXIII, Sec. 2387, Nov. 28, 1990, 104 Stat. 4051; Pub. L.
102-428, Sec. 2, Oct. 21, 1992, 106 Stat. 2183; Pub. L. 103-354, title
II, Sec. 235(a)(13), Oct. 13, 1994, 108 Stat. 3221.)
Codification
October 21, 1992, referred to in subsec. (a)(5)(A), (B), was in the
original ``the date of enactment of this subsection'', which was
translated as meaning the date of enactment of Pub. L. 102-428, which
amended subsec. (a) generally, to reflect the probable intent of
Congress.
Amendments
1994--Pub. L. 103-354 substituted ``Secretary'' for
``Administrator'' wherever appearing.
1992--Subsec. (a). Pub. L. 102-428, Sec. 2(a), amended subsec. (a)
generally. Prior to amendment, subsec. (a) read as follows: ``A direct
or insured loan made under this chapter shall not be sold or prepaid at
a value less than the face value of any outstanding principal balance on
such loan, except when sold to or prepaid by the borrower at the lesser
of the outstanding principal balance due on the loan or the loan's
present value discounted from the face value at maturity at the rate set
by the Administrator. The exception contained in the preceding sentence
shall be effective for the period ending September 30, 1987.''
Subsec. (b). Pub. L. 102-428, Sec. 2(b), inserted heading.
1990--Pub. L. 101-624 designated existing provisions as subsec. (a)
and added subsec. (b).
Section Referred to in Other Sections
This section is referred to in title 26 section 501.
