15 U.S.C. § 697f | Prepayment of development company debentures

(a)

In general

(1)

Prepayment authorized

section 697 of this titleSubject to the requirements set forth in subsection (b), an issuer of a debenture purchased by the Federal Financing Bank and guaranteed by the Administration under this chapter may, at the election of the borrower (in the case of a loan under ) or the issuer (in the case of a small business investment company) and with the approval of the Administration, prepay such debenture in accordance with the provisions of this section.

(2)

Procedure

(A)

In general

In making a prepayment under paragraph (1)—

(i)

section 697 of this title the borrower (in the case of a loan under ) or the issuer (in the case of a small business investment company) shall pay to the Federal Financing Bank an amount that is equal to the sum of the unpaid principal balance due on the debenture as of the date of the prepayment (plus accrued interest at the coupon rate on the debenture) and the amount of the repurchase premium described in subparagraph (B); and

(ii)

the Administration shall pay to the Federal Financing Bank the difference between the repurchase premium paid by the borrower under this subsection and the repurchase premium that the Federal Financing Bank would otherwise have received.

(B)

Repurchase premium

(i)

In general

For purposes of subparagraph (A)(i), the repurchase premium is the amount equal to the product of—

(I)

the unpaid principal balance due on the debenture on the date of prepayment; and

(II)

the applicable percentage rate, as determined in accordance with clauses (ii) and (iii).

(ii)

Applicable percentage rate

For purposes of clause (i)(II), the applicable percentage rate means—

(I)

with respect to a 10-year term loan, 8.5 percent;

(II)

with respect to a 15-year term loan, 9.5 percent;

(III)

with respect to a 20-year term loan, 10.5 percent; and

(IV)

with respect to a 25-year term loan, 11.5 percent.

(iii)

Adjustments to applicable percentage rate

Public Law 103–317The percentage rates described in clause (ii) shall be increased or decreased by the Administration by a factor not to exceed one-third, if the same factor is applied in each case and if the Administration determines that an adjustment is necessary, based on the number of borrowers having given notice of their intent to participate, in order to make the program (including the amounts appropriated for this purpose under ) result in no substantial net gain or loss of revenue to the Federal Financing Bank or to the Administration. Amounts collected in excess of the amount necessary to ensure revenue neutrality shall be refunded to the borrowers.

(b)

Requirements

For purposes of subsection (a), the requirements of this subsection are that—

(1)

the debenture is outstanding and neither the loan that secures the debenture, if any, nor the debenture is in default on the date on which the prepayment is made;

(2)

State, local, or personal funds, or the proceeds of a refinancing in accordance with subsection (d) under the programs authorized by this subchapter, are used to prepay or roll over the debenture; and

(3)

section 697 of this title with respect to a debenture issued under , the issuer certifies that the benefits, net of fees and expenses authorized herein, associated with prepayment of the debenture are entirely passed through to the borrower.

(c)

No prepayment fees or penalties

No fees or penalties other than those specified in this section may be imposed on the issuer, the borrower, the Administration, or any fund or account administered by the Administration as the result of a prepayment under this section.

(d)

Refinancing limitations

(1)

In general

The refinancing of a debenture under sections 697a and 697b of this title, in accordance with subsection (b)(2)—

(A)

shall not exceed the amount necessary to prepay existing debentures, including all costs associated with the refinancing and any applicable prepayment penalty or repurchase premium; and

(B)

section 697b of this title except as provided in paragraphs (2) and (3), shall be subject to the provisions of sections 697a and 697b of this title and the rules and regulations promulgated thereunder, including rules and regulations governing payment of authorized expenses, commissions, fees, and discounts to brokers and dealers in trust certificates issued pursuant to .

(2)

Job creation

section 697a of this title section 697 of this titleAn applicant for refinancing under of a loan made pursuant to shall not be required to demonstrate that a requisite number of jobs will be created with the proceeds of a refinancing.

(3)

Loan processing fee

To cover the cost of loan packaging, processing, and other administrative functions, a development company that provides refinancing under subsection (b)(2) may impose a one-time loan processing fee, not to exceed 0.5 percent of the principal amount of the loan.

(4)

New debentures

Issuers of debentures under subchapter III may issue new debentures in accordance with such subchapter in order to prepay existing debentures as authorized in this section.

(5)

Preliminary notice

(A)

In general

The Administration shall use certified mail and other reasonable means to notify each eligible borrower of the prepayment program provided in this subchapter. Each preliminary notice shall specify the range and dollar amount of repurchase premiums which could be required of that borrower in order to participate in the program. In carrying out this program, the Administration shall provide a period of not less than 45 days following the receipt of such notice by the borrower during which the borrower must notify the Administration of the borrower’s intent to participate in the program. The Administration shall require that a borrower who gives notice of its intent to participate to make an earnest money deposit of $1,000 which shall not be refundable but which shall be credited toward the final repurchase premium.

(B)

“Borrower” defined

For purposes of this paragraph, the term “borrower”, in the case of a small business investment company or a specialized small business investment company, means “issuer”.

(6)

Final notice

Based upon the response to the preliminary notice under paragraph (5), the Administration shall make a final computation of the necessary prepayment premiums and shall notify each qualified respondent of the results of such computation. Each qualified respondent shall be afforded not less than 4 months to complete the prepayment.

(e)

Definitions

For purposes of this section—

(1)

the term “issuer” means—

(A)

section 697 of this title the qualified State or local development company that issued a debenture pursuant to , which has been purchased by the Federal Financing Bank; and

(B)

section 681 of this title a small business investment company licensed pursuant to ; or

(2)

section 697 of this title the term “borrower” means a small business concern whose loan secures a debenture issued pursuant to .

(f)

Regulations

October 22, 1994Not later than 30 days after , the Administration shall promulgate such regulations as may be necessary to carry out this section.

(g)

Authorization

There are authorized to be appropriated $30,000,000 to carry out the provisions of The Small Business Prepayment Penalty Relief Act of 1994.

Pub. L. 85–699, title V, § 509 Pub. L. 103–403, title V, § 503Oct. 22, 1994108 Stat. 4199 Pub. L. 104–208, div. D, title II, § 208(h)(1)(H)Sept. 30, 1996110 Stat. 3009–747(, as added , , ; amended , , .)

Editorial Notes

References in Text

section 661 of this titleFor definition of “this chapter”, referred to in subsec. (a)(1), see References in Text note set out under .

Public Law 103–317 Pub. L. 103–317Aug. 26, 1994108 Stat. 1724, referred to in subsec. (a)(2)(B)(iii), is , , , known as the Departments of Commerce, Justice, and State, The Judiciary, and Related Agencies Appropriations Act, 1995. For complete classification of this Act to the Code, see Tables.

Pub. L. 103–403Oct. 22, 1994108 Stat. 4198 section 661 of this title section 661 of this titleThe Small Business Prepayment Penalty Relief Act of 1994, referred to in subsec. (g), is title V of , , , which enacted this section and provisions set out as notes under this section and . For complete classification of this Act to the Code, see Short Title of 1994 Amendment note set out under and Tables.

Amendments

Pub. L. 104–208, § 208(h)(1)(H)(i)section 681(d) of this title1996—Subsec. (a)(1). , struck out at end “A small business investment company operating under the authority of that has issued a debenture that was purchased by and is held by the Administration, may, under the same terms and conditions, prepay such debenture, and the penalty as provided in this section, and shall thereafter be immediately eligible to apply for additional assistance from the Administration.”

Pub. L. 104–208, § 208(h)(1)(H)(ii)section 681 of this title section 681 of this titleSubsec. (e)(1)(B). , substituted “” for “subsection (c) or (d) of ”.

Statutory Notes and Related Subsidiaries

Intention of Congress

Pub. L. 103–403, title V, § 502Oct. 22, 1994108 Stat. 4198

“(a)

In General .—

Public Law 103–317 108 Stat. 1724 section 661 of this titleThe Small Business Administration shall fully utilize the $30,000,000 appropriated in [] to reduce, in accordance with this title [enacting this section and provisions set out as a note under ] and the amendments made by this title, prepayment penalties imposed in connection with debentures issued under—

“(1)

15 U.S.C. 683 section 303 or 503 of the Small Business Investment Act of 1958 [, 697], which have been purchased by the Federal Financing Bank; and

“(2)

Pub. L. 85–699 15 U.S.C. 681(d) title III [probably means title III of , which is classified to section 681 et seq. of this title] to companies operating under section 301(d) of such Act [], which have been purchased by the Small Business Administration.

“(b)

Equal Opportunity .—

In order to provide an equal opportunity to participate in the program authorized under this title, the Small Business Administration shall afford each borrower or issuer of a debenture subject to this title, not less than 45 days to elect to participate and to provide an earnest money deposit. The Administration shall subsequently allow a period of not less than 4 months, during which those borrowers or issuers that elect to participate shall be allowed to complete the prepayment process.

“(c)

Restrictions on Participation .—

In no event shall the Small Business Administration—

“(1)

allow any borrower or issuer to participate in the program if the borrower or issuer fails to—

“(A)

make a timely election and provide the deposit on a timely basis; or

“(B)

complete the prepayment process within the required time; or

“(2)

allow any borrower or issuer to participate in the program at a percentage rate other than the rate finally determined to be applicable to all other borrowers or issuers with similar terms of years.”

, , , provided that: