(2-6-85, PN 956)
RD Instruction 1942-A
§1942.19 (h) (1) (Con.)
principal plus interest or amortized installments; amortized installments are preferable from the standpoint of Rural Development. Coupon bonds will not be used unless required by State statute.
(i) To compute the value of each coupon when the bond denomination is consistent:
(A) Multiply the amount of the loan or advance by the interest rate and divide the product by 365 days.
(B) Multiply the daily accrual factor determined in (A) by the number of days from the date of advance or last installment date to the next installment date.
(C) Divide the interest computed in (B) by the number of bonds securing the advance; this is the individual coupon amount.
(ii) To compute the value of each coupon when the bond denomination varies:
(A) Multiply the denomination of the bond by the interest rate and divide the product by 365 days.
(B) Multiply the daily accrual factor determined in (A) by the number of days from the date of advance or last installment date to the next installment due date; this is the individual coupon amount.
(2) Bond registration. Bonds will contain provisions permitting registration as to both principal and interest. Bonds purchased by Rural Development will be registered in the name of "United States of America, Rural Development," and will remain so registered at all time while the bonds are held or insured by the United States. The address of Rural Development for registration purposes will be that of the appropriate Rural Development State Office. (Revised 3-1-88, SPECIAL PN.)
(3) Size and quality. Size of bonds and coupons should conform to standard practice. Paper must be of sufficient quality to prevent deterioration through ordinary handling over the life of the loan.
(4) Date of bond. Bonds will preferably be dated as of the day of delivery, however, may be dated another date at the option of the borrower and subject to approval by Rural Development. If the date of delivery is other than the date of the bond, the date of delivery will be stated in the bond. In all cases, interest will accrue from the date of delivery of the funds.
RD Instruction 1942-A
§1942.19 (h) (Con.)
(5) Payment date. Loan payments will be scheduled to coincide with income availability and be in accordance with State law. If consistent with the foregoing, monthly payments will be required and will be enumerated in the bond, other evidence of indebtedness, or other supplemental agreement. However, if State law only permits principal plus interest (P&I) type bonds, annual or seminannual payments will be used. Insofar as practical monthly payments will be scheduled one full month following the date of loan closing; or semiannual or annual payments will be scheduled six or twelve full months respectively, following the date of loan closing or any deferment period. Due dates falling on the 29th, 30th or 31st day of the month will be avoided. (Revised 06-26-91, PN 168.)
(6) Place of payment. Payments on bonds purchased by Rural Development should be submitted to the Rural Development District Office by the borrower. The District Office will then remit the payments to the Finance Office or deposit them in a Treasury General Account in accordance with Subpart B of Part 1951 of this chapter.
(7) Redemptions. Bonds should contain customary redemption provisions; subject, however, to unlimited right of redemption without premium of any bonds held by Rural Development except to the extent limited by the provisions under the "Third Preference" and "Fourth Preference" in paragraph (e) of this section.
(8) Additional revenue bonds. Parity bonds may be issued to complete the project. Otherwise, parity bonds may not be issued unless the net revenues (that is, unless otherwise defined by the State statute, gross revenues less essential operation and maintenance expense) for the fiscal year preceding the year in which such parity bonds are to be issued, were 120 percent of the average annual debt service requirements on all bonds then outstanding and those to be issued; provided, that this limitation may be waived or modified by the written consent of bondholders representing 75 percent of the then outstanding principal indebtedness. Junior and subordinate bonds may be issued in accordance with the loan agreement.
(9) Scheduling of Rural Development payments when joint financing is involved. In all cases in which Rural Development is participating with another lender in the joint financing of the project to supply funds required by one applicant, the Rural Development payments of principal and interest should approximate amortized installments.
(10) Precautions. The following types of provisions in debt instruments should be avoided.
(02-06-85) PN 956
RD Instruction 1942-A
§1942.19 (h)(10) (Con.)
(i) Provisions for the holder to manually post each payment to the instrument.
(ii) Provisions for returning the permanent or temporary debt instrument to the borrower in order that it, rather than Rural Development, may post the date and amount of each advance or repayment on the instrument.
(iii) Defeasance provisions in loan or bond resolutions. When a bond issue is defeated, a new issue is sold which supersedes the contractual provisions of the prior issue, including the refinancing requirement and any lien on revenues. Since defeasance in effect precludes Rural Development from requiring graduation before the final maturity date, it represents a violation of the statutory refinancing requirement, therefore it is disallowed. (Revised 05-03-89, SPECIAL PN.)
(iv) Provisions that amend covenants contained in Forms RD 1942-47, "Loan Resolution (Public Bodies)," or RD 1942-9, "Loan Resolution Security Agreement." (Revised 06-26-91, PN 168.)
(11) Multiple Loan Instruments. The following will be adhered to when preparing debt instruments:
(i) When more than one loan type is used in financing a project, each type of loan will be evidenced by a separate debt instrument or series of debt instruments.
(ii) Loan funds obligated in different fiscal years and those obligated with different interest rates or terms in the same fiscal year will be evidenced by separate debt instruments.
(iii) Loan funds obligated for the same loan type in the same fiscal year at the same interest rate and term may be combined in the same debt instrument; provided the borrower has been notified on Form RD 1940-1, "Request for Obligation of Funds," of the action.
(i) Bidding by Rural Development. Bonds offered for public sale shall be offered in accordance with State law, in such a manner to encourage public bidding. Rural Development will not submit a bid at the advertised sale unless required by State law, nor will reference to Rural Development's rates and terms be included. If no acceptable bid is received, Rural Development will negotiate the purchase of the bonds.