§940c–1. Guarantees for bonds and notes issued for electrification or telephone purposes

(a) In general

Subject to subsection (b) of this section, the Secretary shall guarantee payments on bonds or notes issued by cooperative or other lenders organized on a not-for-profit basis if the proceeds of the bonds or notes are used to make loans for any electrification or telephone purpose eligible for assistance under this chapter, including section 904 or 922 of this title or to refinance bonds or notes issued for such purposes.

(b) Limitations

(1) Outstanding loans

A lender shall not receive a guarantee under this section for a bond or note if, at the time of the guarantee, the total principal amount of such guaranteed bonds or notes outstanding of the lender would exceed the principal amount of outstanding loans of the lender for electrification or telephone purposes that have been made concurrently with loans approved for such purposes under this chapter.

(2) Generation of electricity

The Secretary shall not guarantee payment on a bond or note issued by a lender, the proceeds of which are used for the generation of electricity.

(3) Qualifications

The Secretary may deny the request of a lender for the guarantee of a bond or note under this section if the Secretary determines that-

(A) the lender does not have appropriate expertise or experience or is otherwise not qualified to make loans for electrification or telephone purposes;

(B) the bond or note issued by the lender would not be investment grade quality without a guarantee; or

(C) the lender has not provided to the Secretary a list of loan amounts approved by the lender that the lender certifies are for eligible purposes described in subsection (a) of this section.

(4) Interest rate reduction

(A) In general

Except as provided in subparagraph (B), a lender may not use any amount obtained from the reduction in funding costs as a result of the guarantee of a bond or note under this section to reduce the interest rate on a new or outstanding loan.

(B) Concurrent loans

A lender may use any amount described in subparagraph (A) to reduce the interest rate on a loan if the loan is-

(i) made by the lender for electrification or telephone projects that are eligible for assistance under this chapter; and

(ii) made concurrently with a loan approved by the Secretary under this chapter for such a project, as provided in section 937 of this title.

(c) Fees

(1) In general

A lender that receives a guarantee issued under this section on a bond or note shall pay a fee to the Secretary.

(2) Amount

The amount of an annual fee paid for the guarantee of a bond or note under this section shall be equal to 30 basis points of the amount of the unpaid principal of the bond or note guaranteed under this section.

(3) Payment

A lender shall pay the fees required under this subsection on a semiannual basis.

(4) Rural economic development subaccount

Subject to subsection (e)(2) of this section, fees collected under this subsection shall be-

(A) deposited into the rural economic development subaccount maintained under section 940c(b)(2)(A) of this title, to remain available until expended; and

(B) used for the purposes described in section 940c(b)(2)(B) of this title.

(d) Guarantees

(1) In general

A guarantee issued under this section shall-

(A) be for the full amount of a bond or note, including the amount of principal, interest, and call premiums;

(B) be fully assignable and transferable; and

(C) represent the full faith and credit of the United States.

(2) Limitation

To ensure that the Secretary has the resources necessary to properly examine the proposed guarantees, the Secretary may limit the number of guarantees issued under this section to 5 per year.

(3) Department opinion

On the timely request of a lender, the General Counsel of the Department of Agriculture shall provide the Secretary with an opinion regarding the validity and authority of a guarantee issued to the lender under this section.

(e) Authorization of appropriations

(1) In general

There are authorized to be appropriated such sums as are necessary to carry out this section.

(2) Fees

To the extent that the amount of funds appropriated for a fiscal year under paragraph (1) are not sufficient to carry out this section, the Secretary may use up to 1/3 of the fees collected under subsection (c) of this section for the cost of providing guarantees of bonds and notes under this section before depositing the remainder of the fees into the rural economic development subaccount maintained under section 940c(b)(2)(A) of this title.

(f) Termination

The authority provided under this section shall terminate on September 30, 2007.

(May 20, 1936, ch. 432, title III, §313A, as added Pub. L. 107–171, title VI, §6101(a), May 13, 2002, 116 Stat. 413 .)

Regulations and Implementation

Pub. L. 108–199, div. A, title VII, §750(b), Jan. 23, 2004, 118 Stat. 38 , provided that: "The Secretary shall publish a proposed rule to carry out section 313A of the Rural Electrification Act of 1936 [7 U.S.C. 940c–1] within 60 days of enactment of this Act [Jan. 23, 2004]."

Pub. L. 107–171, title VI, §6101(b), May 13, 2002, 116 Stat. 415 , provided that:

"(1) Regulations.-Not later than 180 days after the date of enactment of this Act [May 13, 2002], the Secretary of Agriculture shall promulgate regulations to carry out the amendments made by this section [enacting this section].

"(2) Implementation.-Not later than 240 days after the date of enactment of this Act [May 13, 2002], the Secretary shall implement the amendment made by this section [enacting this section]."