Special Servicing of Telecommunications Programs Loans for Financially Distressed Borrowers

Published date25 February 2020
Citation85 FR 10555
Record Number2020-01891
SectionRules and Regulations
CourtRural Utilities Service
Federal Register, Volume 85 Issue 37 (Tuesday, February 25, 2020)
[Federal Register Volume 85, Number 37 (Tuesday, February 25, 2020)]
                [Rules and Regulations]
                [Pages 10555-10562]
                From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
                [FR Doc No: 2020-01891]
                ========================================================================
                Rules and Regulations
                 Federal Register
                ________________________________________________________________________
                This section of the FEDERAL REGISTER contains regulatory documents
                having general applicability and legal effect, most of which are keyed
                to and codified in the Code of Federal Regulations, which is published
                under 50 titles pursuant to 44 U.S.C. 1510.
                The Code of Federal Regulations is sold by the Superintendent of Documents.
                ========================================================================
                Federal Register / Vol. 85 , No. 37 / Tuesday, February 25, 2020 /
                Rules and Regulations
                [[Page 10555]]
                DEPARTMENT OF AGRICULTURE
                Rural Utilities Service
                7 CFR Part 1752
                [RUS-19-Telecom-0021]
                RIN 0572-AC41
                Special Servicing of Telecommunications Programs Loans for
                Financially Distressed Borrowers
                AGENCY: Rural Utilities Service, USDA.
                ACTION: Final rule; request for comments.
                -----------------------------------------------------------------------
                SUMMARY: The Rural Utilities Service (RUS), a Rural Development agency
                of the United States Department of Agriculture (USDA), hereinafter
                referred to as ``RUS'' or ``the Agency'', is issuing a final rule with
                request for comments to outline the general policies for servicing
                actions associated with financially distressed borrowers from the
                Telecommunications Infrastructure Loan Program, Rural Broadband
                Program, Distance Learning and Telemedicine Program, Broadband
                Initiatives Program, and Rural e-Connectivity Pilot Program. This rule
                will ensure recipients comply with any revised terms in repayment on
                loans and ensures serving actions are handled by RUS consistently
                across programs.
                DATES: Effective date: This final rule is effective February 25, 2020.
                 Comment date: Comments are due by April 27, 2020.
                ADDRESSES: Comments may be submitted on this rule by the following
                method:
                 Federal eRulemaking Portal: Go to http://www.regulations.gov and, in the lower ``Search Regulations and Federal
                Actions'' box, select ``Rural Utilities Service'' from the agency drop-
                down menu, then click on ``Submit.'' In the Docket ID column, select
                RUS-19-Telecom-0021 to submit or view public comments and to view
                supporting and related materials available electronically. Information
                on using Regulations.gov, including instructions for accessing
                documents, submitting comments, and viewing the docket after the close
                of the comment period, is available through the site's ``User Tips''
                link.
                 Other Information: Additional information about RUS and
                its programs is available on the internet at https://www.usda.gov/topics/rural.
                FOR FURTHER INFORMATION CONTACT: For general inquiries, contact Laurel
                Leverrier, Acting Assistant Administrator Telecommunications Program,
                Rural Utilities Service, U.S. Department of Agriculture (USDA), email:
                [email protected], telephone: (202) 720-3416.
                SUPPLEMENTARY INFORMATION:
                Executive Order 12866, Regulatory Impact Analysis
                 This rule has been determined to be significant and was reviewed by
                the Office of Management and Budget under Executive Order 12866. In
                accordance with Executive Order 12866, a Regulatory Impact Analysis was
                completed, outlining the costs and benefits of implementing this
                program in rural America. The complete analysis is available in Docket
                RUS-19-Telecom-0021 on Regulations.gov. The following is a summary
                discussion of the Analysis:
                 RUS is publishing this rulemaking action to codify a new servicing
                regulation which outlines policies for servicing actions associated
                with distressed borrowers from the Telecommunications Infrastructure
                Loan Program, Rural Broadband Program, Distance Learning and
                Telemedicine Program, Broadband Initiatives Program, and Rural e-
                Connectivity Pilot Program (collectively referred to as the ``RUS
                Telecommunications Programs''). The challenges in providing high-
                quality, but high-cost, telecommunications services to sparsely
                populated and remote rural areas are well known. Historically, most RUS
                Telecommunications Program borrowers have operated in a highly
                regulated industry with predictable revenue streams, which served to
                mitigate the risks associated with these loans. As technologies and
                services evolve, new competitors and alternative technology packages
                are changing the industry. Due to these recent changes in the
                telecommunications industry and regulatory environment, this rulemaking
                will ensure recipients comply with any revised terms in repayment on
                loans and ensures serving actions are handled by RUS consistently
                across the RUS Telecommunications Programs.
                 The new regulation is consistent with the Administration's efforts
                to streamline Government functions, improve the efficiency and
                effectiveness of Government activities, and strive to be more borrower-
                friendly. The new regulation will ensure consistency and
                appropriateness of the Agency's actions when borrowers default on their
                debts. Specifically, it will:
                 (1) Ensure that RUS, under its own authority, will quickly address
                servicing actions for its RUS Telecommunications Programs;
                 (2) Ensure servicing actions are handled by RUS consistently across
                all RUS Telecommunications Programs;
                 (3) Maximize Risk Management of the loan portfolio;
                 (4) Improve the Agency's capacity to identify, address, and provide
                guidance to distressed Borrowers in the early stages of distress;
                 (5) Result in more timely responses by setting forth clear
                standards for identifying and mitigating material defaults;
                 (6) Improve the probability of repayment, and reduce legal costs on
                its borrowers and improve overall customer service;
                 (7) Ensure that servicing recipients comply with any revised terms
                in repayment on loans.
                 (8) Provide efficient recovery of debt which may mitigate negative
                impacts on program subsidy rates; and
                 (9) Reduces duplication of staff effort and costs of duplicative
                labor between federal Agencies.
                Congressional Review Act
                 Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.),
                the Office of Information and Regulatory Affairs designated this rule
                as not a major rule, as defined by 5 U.S.C. 804(2).
                Executive Order 12988, Civil Justice Reform
                 This rule has been reviewed under Executive Order 12988, Civil
                Justice Reform. The Agency has determined that this rule meets the
                applicable standards provided in section 3 of the
                [[Page 10556]]
                Executive order. In addition, all state and local laws and regulations
                that conflict with this rule will be preempted. No retroactive effect
                will be given to this rule.
                Executive Order 12372, Intergovernmental Consultation
                 This rule is excluded from the scope of Executive Order 12372,
                Intergovernmental Consultation, which may require a consultation with
                State and local officials. See the final rule related notice entitled,
                ``Department Programs and Activities Excluded from Executive Order
                12372'' (50 FR 47034) advising that RUS loans and loan guarantees were
                not covered by Executive Order 12372.
                Regulatory Flexibility Act Certification
                 RUS certifies that this rule will not have a significant economic
                impact on a substantial number of small entities, as defined in the
                Regulatory Flexibility Act (5 U.S.C. 601 et seq.). The RUS
                telecommunications program provides loans to borrowers at interest
                rates and on terms that are more favorable than those generally
                available from the private sector. RUS borrowers, as a result of
                obtaining federal financing, receive economic benefits that exceed any
                direct economic costs associated with complying with RUS regulations
                and requirements.
                Environmental Impact Statement
                 This rule has been examined under Agency environmental regulations
                at 7 CFR part 1970. The Administrator has determined that this is not a
                major Federal action significantly affecting the environment.
                Therefore, in accordance with the National Environmental Policy Act of
                1969 (42 U.S.C. 4321 et seq.), an Environmental Impact Statement is not
                required.
                Catalog of Federal Domestic Assistance
                 The Catalog of Federal Domestic Assistance (CFDA) number assigned
                to the RUS Telecommunications Programs are as follows: 10.752, Rural e-
                Connectivity Pilot Program; 10.851, Rural Telephone Loans and Loan
                Guarantees; 10.855, Distance Learning and Telemedicine Loans and
                Grants; 10.863 Community Connect Grant Program and 10.886, Rural
                Broadband Access Loans and Loan Guarantees. The Catalog is available on
                the internet at https://beta.sam.gov/. The Government Publishing Office
                (GPO) prints and sells the CFDA to interested buyers. For information
                about purchasing the Catalog of Federal Domestic Assistance from GPO,
                call the Superintendent of Documents at 202-512-1800 or toll free at
                866-512-1800, or access GPO's online bookstore at https://bookstore.gpo.gov.
                Unfunded Mandates
                 This rule contains no Federal mandates (under the regulatory
                provisions of Title II of the Unfunded Mandates Reform Act of 1995) for
                state, local, and tribal governments or the private sector. Therefore,
                this rule is not subject to the requirements of sections 202 and 205 of
                the Unfunded Mandates Reform Act of 1995.
                E-Government Act Compliance
                 RUS is committed to the E-Government Act, which requires Government
                agencies in general to provide the public the option of submitting
                information or transacting business electronically to the maximum
                extent possible.
                Executive Order 13132, Federalism
                 The policies contained in this rule do not have any substantial
                direct effect on states, on the relationship between the national
                government and the states, or on the distribution of power and
                responsibilities among the various levels of government. Nor does this
                rule impose substantial direct compliance costs on state and local
                governments. Therefore, consultation with the states is not required.
                Executive Order 13175, Consultation and Coordination With Indian Tribal
                Governments
                 This rule has been reviewed in accordance with the requirements of
                Executive Order 13175, ``Consultation and Coordination with Indian
                Tribal Governments.'' Executive Order 13175 requires Federal agencies
                to consult and coordinate with tribes on a government-to-government
                basis on policies that have tribal implications, including regulations,
                legislative comments or proposed legislation, and other policy
                statements or actions that have substantial direct effects on one or
                more Indian tribes, on the relationship between the Federal Government
                and Indian tribes or on the distribution of power and responsibilities
                between the Federal Government and Indian tribes. Rural Development, a
                mission area for which RUS is an agency, has assessed the impact of
                this rule on Indian tribes. Given that no tribal entity has requested
                servicing actions in the past, and the limited impact this rule could
                have on such entities should they request such a servicing action, the
                agency has determined that to the best of our knowledge, this rule does
                not, have tribal implications that require tribal consultation under
                E.O. 13175. If a tribe would like to engage in consultation with Rural
                Development on this rule, please contact Rural Development's Native
                American Coordinator at (720) 544-2911 or [email protected].
                Civil Rights Impact Analysis
                 Rural Development, a mission area for which RUS is an agency, has
                reviewed this rule in accordance with USDA Regulation 4300-4, Civil
                Rights Impact Analysis,'' to identify any major civil rights impacts
                the rule might have on program participants on the basis of age, race,
                color, national origin, sex, or disability. After review and analysis
                of the rule and available data, it has been determined that based on
                the analysis of the program purpose, application submission and
                eligibility criteria, issuance of this final rule will neither
                adversely nor disproportionately impact very low, low and moderate-
                income populations, minority populations, women, Indian tribes or
                persons with disability, by virtue of their race, color, national
                origin, sex, age, disability, or marital or familial status.
                Paperwork Reduction Act and Recordkeeping Requirements
                 The Information Collection and Recordkeeping requirements contained
                in this rule have been approved by an emergency clearance under OMB
                Control Number 0572-0153. In accordance with the Paperwork Reduction
                Act of 1995 (44 U.S.C. chapter 35), RUS invites comments on this
                information collection for which the Agency intends to request approval
                from the Office of Management and Budget (OMB). RUS invites comments on
                any aspect of this collection of information including suggestions for
                reducing the burden. Comments may be submitted regarding this
                information collection by the following method:
                 Federal eRulemaking Portal: Go to https://www.regulations.gov and, in the lower ``Search Regulations and Federal
                Actions'' box, select ``Rural Utilities Service'' from the agency drop-
                down menu, then click on ``Submit.'' In the Docket ID column, select
                RUS-19-Telecom-0021 to submit or view public comments and to view
                supporting and related materials available electronically. Information
                on using Regulations.gov, including instructions for accessing
                documents, submitting comments, and viewing the docket after the close
                of the comment period, is available through the site's ``User Tips''
                link. Comments on this information collection must be received by April
                27, 2020.
                [[Page 10557]]
                 Comments are invited on (a) the accuracy of the agency's estimate
                of burden including the validity of the methodology and assumption
                used; (b) ways to enhance the quality, utility, and clarity of the
                information to be collected; and (c) ways to minimize the burden of the
                collection of information on those who are to respond, including using
                appropriate automated, electronic, mechanical, or other technological
                collection techniques on other forms and information technology.
                 Title: Special Servicing of Telecommunications Programs Loans for
                Financially Distressed Borrowers.
                 OMB Control Number: 0572-0153.
                 Type of Request: New.
                 Abstract: The RUS Telecommunications Programs provides loan funding
                to build and expand broadband service into unserved and underserved
                rural communities, along with very limited funding to support the costs
                to acquire equipment to provide distance learning and telemedicine
                service. While each program has its own regulation, which outlines
                general program policies and requirements, types of assistance, and the
                requirements for advance of funds, there is no regulation currently in
                place to address how RUS will handle servicing actions associated with
                distressed loans. The information collected from borrowers that need
                servicing assistance, as required by this new servicing regulation,
                will give RUS greater authority to address servicing actions and will
                streamline and expedite servicing actions, improve the government's
                recovery on such loans, and improve overall customer service. Examples
                of information that will be collected by the Agency from the borrower
                include, but are not limited to, a request and explanation for
                servicing action, various financial, subscriber and organizational
                information, as well as other documents and information that may be
                relevant as determined by RUS.
                 Estimate of Burden: Public reporting burden for this collection of
                information is estimated to average 5 hours per responses.
                 Estimated Number of Respondents: 5.
                 Estimated Number of Total Annual Responses per Respondents: 137.
                 Estimated Total Annual Burden on Respondents: 694.50 hours.
                 Copies of this information collection can be obtained from MaryPat
                Daskal, Regulatory Division Team 2, Rural Development Innovation
                Center, U.S. Department of Agriculture, 1400 Independence Ave. SW, Stop
                1522, Washington, DC 20250. Phone: 202-720-7853.
                 All responses to this information collection and recordkeeping
                notice will be summarized and included in the request for OMB approval.
                All comments will also become a matter of public record.
                Background
                 The Agency improves the quality of life in rural America by
                providing investment capital for deployment of rural telecommunications
                infrastructure. To achieve the goal of increasing economic opportunity
                in rural America, the Agency finances infrastructure that enables
                access to a seamless, nationwide telecommunications network. With
                access to the same advanced telecommunications networks as its urban
                counterparts--especially those designed to accommodate distance
                learning, telework, and telemedicine --rural America will eventually
                see improving educational opportunities, health care, economies, safety
                and security, and ultimately higher employment. The Telecommunications
                Infrastructure Loan Program, Rural Broadband Program, Distance Learning
                and Telemedicine Program, Broadband Initiatives Program and ReConnect
                Program (hereinafter collectively referred to as the ``RUS
                Telecommunications Programs'') provide loan funding to build and expand
                broadband and telecommunications services in rural communities.
                 The RUS Telecommunications Programs currently take servicing
                actions on approximately 10-12 projects each year. While each program
                has its own regulation, which outlines general program policies and
                requirements, types of assistance, and the requirements for advance of
                funds, there is no regulation currently in place to address how RUS
                will handle special servicing actions associated with financially
                distressed loans. At present, when a Borrower is financially
                distressed, the Agency must rely on the authority of the Department of
                Justice (DOJ) for many of these actions. This servicing regulation will
                be located in 7 CFR part 1752 and will give RUS greater authority to
                address servicing actions directly, without the additional transactions
                costs associated with coordinating with DOJ. RUS will still work
                closely with DOJ on cases involving foreclosure or bankruptcy, but this
                rule will enable RUS to resolve many servicing actions without having
                to involve DOJ. This will streamline and expedite servicing actions,
                improve the Government's recovery on such loans, and improve overall
                customer service. Since most RUS Telecommunications Program borrowers
                are utilities, faster resolution of servicing actions will ensure that
                rural Americans continue to receive service.
                Regulation Objective
                 This rule outlines the general policies and procedures for
                servicing actions associated with the RUS Telecommunications Programs
                Borrowers in financial distress. The agency views this rule as narrowly
                applying to loan servicing procedures within RUS. It will ensure
                recipients comply with the established objectives and requirements for
                loans, repaying loans on schedule or within the revised terms as agreed
                to by the Agency, and act in accordance with any necessary agreements.
                The rule will also ensure that servicing actions are handled by the
                Agency in a consistent approach across all RUS Telecommunications
                Programs, as well as protect the financial interest of the Agency. To
                implement these changes, RUS is publishing this action as a final rule
                with request for comments.
                 To help inform RUS on the effects of the new regulation, RUS is
                taking this opportunity to request public comment on the regulation.
                 How can RUS improve the review of servicing requests,
                including the documentation needed to request a servicing action, to
                avoid placing unnecessary burden or duplicative requirements on
                borrowers?
                 Are there other servicing options that the agency has not
                addressed in the rulemaking?
                 Given the amount of debt and complexity of borrower's
                other debt arrangements, what is an appropriate amount of time to be
                given to respond to agency requests, understanding that the Government
                has a responsibility to address the default timely?
                Conclusion
                 RUS already acts to address servicing needs as they arise but, in
                many cases, must rely on DOJ since the Telecommunications Programs lack
                their own servicing regulations. RUS believes that a stand-alone
                regulation will minimize the programs' reliance on DOJ and the
                regulatory change will give RUS the authority to quickly address
                servicing actions without having to involve DOJ, which will simplify
                the process and reduce the burden and costs on Borrowers. This
                regulation will maximize the ability of the Borrowers to use and
                understand the available servicing tools under the applicable program.
                It will also ensure Borrowers comply with the established objectives
                and requirements for loans, repay loans
                [[Page 10558]]
                on schedule, and act in accordance with any necessary agreements.
                Additionally, this regulation will ensure serving actions are handled
                consistently, and protect the financial interest of the Agency.
                List of Subjects in 7 CFR Part 1752
                 Broadband, Community development, Grant programs-education, Grant
                programs-health, Loan programs--communications, Reporting and
                recordkeeping requirements, Rural areas, Telephone, Telecommunications.
                 Accordingly, for reasons set forth in the preamble, chapter XVII,
                title 7, the Code of Federal Regulations is amended by adding part 1752
                to read as follows:
                PART 1752--SERVICING OF TELECOMMUNICATIONS PROGRAMS
                Sec.
                1752.1 Purpose.
                1752.2 Objectives.
                1752.3 Definitions.
                1752.4 Availability of forms, bulletins, and procedures.
                1752.5 Monetary default by Borrower.
                1752.6 Request for special servicing action.
                1752.7 Civil rights and requirements.
                1752.8--1752.10 [Reserved]
                1752.11 Consent to additional, unsecured debt.
                1752.12 Parity lien.
                1752.13 Reamortization of or rescheduling of the debt payments.
                1752.14 Deferment of principal and/or interest payments.
                1752.15 Interest rate adjustments.
                1752.16 Transfer of collateral and assumption of debt.
                1752.17 Sale or exchange of loan collateral.
                1752.18 Sale of the note.
                1752.19 Debt settlement.
                1752.20--1752.24 [Reserved]
                1752.25 Special terms.
                1752.26 No rights to special servicing actions.
                1752.27 Confidentiality of borrower information.
                1752.28 Interest accrual.
                1752.29 Communications laws.
                1752.30 Information collection and reporting requirements.
                1752.31 Authorized signatories.
                 Authority: 7 U.S.C. 1981(b)(4), 7 U.S.C. 901 et seq. and 7
                U.S.C. 950aaa et seq.
                Sec. 1752.1 Purpose.
                 This part prescribes the policies and procedures for loan and grant
                servicing for financial assistance made under the Rural Utilities
                Service (RUS) Telecommunications Infrastructure Loan Program, Rural
                Broadband Program, Distance Learning and Telemedicine Program,
                Broadband Initiatives Program, and the Rural e-Connectivity Pilot
                Program (in this part collectively referred to as the ``RUS
                Telecommunications Programs'').
                Sec. 1752.2 Objectives.
                 The purpose of loan and grant servicing functions is to assist
                recipients to meet the objectives of loans and grants, repay loans on
                schedule, comply with agreements and protect RUS' financial interests.
                The provisions of this part will ensure recipients comply with any
                revised terms in repayment on loans and ensures serving actions are
                handled consistently by the Agency.
                Sec. 1752.3 Definitions.
                 The terms and conditions provided in this section are applicable to
                this part only. All financial terms not defined in this section shall
                have the commonly-accepted meaning under Generally Accepted Accounting
                Principles.
                 Acceleration. A written notice informing the Borrower that the
                total unpaid principal and interest is due and payable immediately.
                 Administrator. Administrator of the Rural Utilities Service.
                 Agency. The Rural Utilities Service, an agency of the United States
                Department of Agriculture's Rural Development mission area.
                 Assumption of debt. Agreement by one party to legally bind itself
                to repay the debt of the RUS borrower.
                 Borrower. Recipient of loan funding under a RUS Telecommunications
                Program.
                 Broadband system. The telecommunications or broadband network
                financed with RUS loan and/or grant funding or maintained by the
                Borrower and contained as part of the collateral to the loan.
                 Cancellation. Final discharge of debt with a release of liability.
                 Charge-off. Write-off of a debt and termination of servicing
                activity without release of liability. A charge-off is a decision by
                the Agency to remove debt from Agency receivables, however, future
                payments may be received.
                 Collateral. Means the assets, equipment and/or revenues pledged as
                security for the loan as defined in the loan documents.
                 Disposition of facility. Relinquishing control of a facility to
                another entity.
                 Loan Documents. All associated loan agreements, loan and security
                agreements, loan/grant agreements, mortgages, and promissory notes, as
                applicable.
                 Liquidation. Satisfaction of a debt through the sale of a
                Borrower's assets and cancellation of liabilities.
                 Parity lien. A lien having an equal lien position to another
                lender's lien on a Borrower's asset.
                 Rural Utilities Service (RUS). An agency of the United States
                Department of Agriculture's Rural Development mission area.
                 Settlement. Compromise, adjustment, cancellation, or charge-off of
                a debt owed to the Agency. The term ``settlement'' is used to refer to
                any of these actions, whether individually or collectively.
                 Unliquidated obligations. Obligated loan funds that have not been
                advanced.
                 Voluntary conveyance. A method by which title to security is
                voluntarily transferred to the Federal Government.
                Sec. 1752.4 Availability of forms, bulletins, and procedures.
                 Forms, bulletins, and procedures referenced in this part are
                available online at https://www.rd.usda.gov/publications/regulations-guidelines.
                Sec. 1752.5 Monetary default by Borrower.
                 A defaulting Borrower's primary responsibility is to expeditiously
                bring the delinquent account current. If a monetary default exceeds 60
                days, RUS will attempt to discuss the situation with the Borrower and
                make the Borrower aware of options that may be available. In
                considering options, the prospects for providing a permanent cure
                without adversely affecting the risk to the Agency is the paramount
                objective. RUS will also work with entities that are not in monetary
                default but whose financial position is such that, without RUS action,
                a monetary default is imminent within the next 24 months, as evidenced
                by a financial forecast provided by the Borrower. RUS receives
                quarterly financial reports and annual audits from borrowers and
                actively monitors the borrower's Times Interest Earned Ratio (TIER),
                Current Ration, Debt Service Coverage Ratio, and Net Worth.
                Sec. 1752.6 Request for special servicing action.
                 (a) Special servicing actions include, but are not limited to, one
                or more of the following:
                 (1) Consent to additional, unsecured debt;
                 (2) Parity lien;
                 (3) Reamortization or rescheduling of debt payments;
                 (4) Deferment of principal and/or interest;
                 (5) Interest rate adjustment;
                 (6) Transfer of collateral and assumption of debt;
                 (7) Sale or exchange of loan collateral;
                 (8) Sale of the note; and
                 (9) Debt settlement.
                 (b) In order for the Agency to consider one or more of the curative
                actions cited in paragraph (a) of this section, the Borrower must
                submit a written request to RUS.
                 (1) The written request must contain the following items:
                [[Page 10559]]
                 (i) A detailed explanation of the request and why it is needed.
                 (ii) Most recent audited financial statements for the Borrower.
                 (iii) Borrower's Pro Forma 5-year financial forecast, which
                includes an Income Statement, Balance Sheet, and Statement of Cash
                Flows, 2 years of historical data, current year data and a 5-year
                forecast, with detailed supporting assumptions. Additionally, in order
                to request assistance under this paragraph (b)(1)(iii), the Borrower
                must make a showing that the account is delinquent and cannot be
                brought current within one year, or that the Borrower will become
                delinquent within 24 months, as demonstrated in the Pro Forma.
                 (iv) Existing and projected subscriber numbers and service tiers,
                along with pricing for each tier. Additionally, for companies receiving
                support from the Federal Communications Commission, a detailed forecast
                of the support revenue, certified by a cost consultant, must be
                included.
                 (v) Current organizational chart for the Borrower, related
                entities, and affiliated companies, as well as information relating to
                ownership interest in the Borrower and its related entities.
                 (vi) A complete list of all collateral and steps the Borrower is
                taking to preserve the collateral.
                 (2) The Agency may request the additional documents in paragraphs
                (b)(2)(i) through (iv) of this section after reviewing the Borrower's
                servicing request:
                 (i) An appraisal in order to determine the adequacy of loan
                security or repayment ability;
                 (ii) An itemized list of estimated liquidation expenses expected to
                be incurred along with justification for each expense;
                 (iii) A legal opinion regarding RUS' interests in the impacted
                collateral and supporting evidence, in the form of Uniform Commercial
                Code Statements and filed Mortgages, that RUS maintains a first lien
                position on all assets of the Borrower, or such collateral as mandated
                by the Loan Documents; and
                 (iv) Such other documents that may be relevant in individual cases,
                as determined by RUS.
                 (3) When submitting a request for a servicing action, the
                distressed Borrower must consent to the following during the request
                and for the duration of the servicing action:
                 (i) On-site visit. A Management Analysis Profile (MAP) visit of the
                Borrower's entire operation;
                 (ii) RUS priority payment. Borrowers must agree that no other
                creditors will be paid without RUS consent, if RUS is not receiving
                full principal and interest payments;
                 (iii) Additional reporting and monitoring. Throughout the term of
                the servicing action(s), RUS will require increased frequency and/or
                additional details to the reporting and monitoring required under the
                terms of the Loan Documents; and
                 (iv) Additional controls and limitations. RUS may require
                additional controls and limitations such as segregation of accounts,
                RUS review of expenditures, etc.
                 (c) False information provided by a Borrower, or by entities acting
                on behalf of the Borrower, will give rise to the immediate termination
                of any servicing action(s).
                Sec. 1752.7 Civil rights and requirements.
                 (a) Equal opportunity and nondiscrimination. The Agency will ensure
                that equal opportunity and nondiscriminatory requirements are met in
                accordance with the Equal Credit Opportunity Act and 7 CFR part 15. In
                accordance with Federal civil rights law and U.S. Department of
                Agriculture (USDA) civil rights regulations and policies, the USDA, its
                agencies, offices, and employees, and institutions participating in or
                administering USDA programs are prohibited from discriminating based on
                race, color, national origin, religion, sex, gender identity (including
                gender expression), sexual orientation, disability, age, marital
                status, family/parental status, income derived from a public assistance
                program, political beliefs, or reprisal or retaliation for prior civil
                rights activity, in any program or activity conducted or funded by USDA
                (not all bases apply to all programs).
                 (b) Civil rights compliance. Recipients of Federal assistance under
                this part must comply with the Americans with Disabilities Act of 1990,
                Title VI of the Civil Rights Act of 1964, and Section 504 of the
                Rehabilitation Act of 1973. Prior to determining eligibility of any
                servicing action under this part, the Agency will determine that the
                Borrower is in compliance with all civil rights requirements of the
                latest Civil Rights Compliance Review conducted by the Agency.
                 (c) Discrimination complaints. Persons believing they have been
                subjected to discrimination prohibited by this section may file a
                complaint personally, or by an authorized representative with USDA,
                Director, Office of Adjudication, 1400 Independence Avenue SW,
                Washington, DC 20250. A complaint must be filed no later than 180 days
                from the date of the alleged discrimination, unless the time for filing
                is extended by the designated officials of USDA or the Agency.
                Sec. Sec. 1752.8--1752.10 [Reserved]
                Sec. 1752.11 Consent to additional, unsecured debt.
                 (a) An additional, unsecured loan from another lender to the
                Borrower may be approved subject to the conditions set forth in this
                section. In order to request assistance under this section, the
                Borrower must make a showing that the additional debt will cure any
                existing or projected delinquency. Additionally, the following
                requirements must be met, as determined by RUS:
                 (1) The additional debt will not disadvantage RUS's standing or
                lien on any of the collateral already pledged to RUS;
                 (2) The additional debt will not adversely impact the continued
                financial viability of the Borrower or the Borrower's ability to carry
                out the purposes of the RUS loan;
                 (3) The debt is needed to resolve short-term, negative cashflow
                problems; and
                 (4) The Borrower is in good standing with the Agency or will become
                so with the additional debt.
                 (b) In the case where all assets of the Borrower are not secured by
                the Government's debt, the Borrower may request additional debt that is
                secured by collateral that is not subject to the Government's security
                interest.
                Sec. 1752.12 Parity lien.
                 A Borrower's request for parity may be approved subject to the
                conditions set forth in this section. In order to request assistance
                under this section, the Borrower must make a showing that the amount of
                new debt is at least equal to the amount of the collateral being added
                and will cure any existing or projected delinquency. The following
                factors will be considered in assessing whether the request is in the
                Government's best interest:
                 (a) The value of the added assets compared with the amount of new
                debt to be secured;
                 (b) The value of the assets already pledged under the Loan
                Documents, and any effects of the proposed transaction on the value of
                those assets;
                 (c) The ratio of the total outstanding debt secured under the Loan
                Documents to the value of all assets pledged as security under the Loan
                Documents;
                 (d) The Borrower's ability to repay its debt owed to the
                Government;
                 (e) The overall financial viability of the Borrower; and
                [[Page 10560]]
                 (f) That the Borrower is in good standing with the Agency or will
                become so with the parity lien; and
                 (g) Such other conditions as may be imposed by the Agency on a
                case-by-case basis, as determined by RUS.
                Sec. 1752.13 Reamortization of or rescheduling of the debt payments.
                 A reamortization or rescheduling of debt payments may be approved
                subject to the conditions set forth in this section. In order to
                request a reamortization or rescheduling of debt payments, the Borrower
                must make a showing that the Borrower does not have access to other
                sources of capital or alternatives for resolving the delinquency, and
                that the reamortization or rescheduling of debt payment will cure any
                existing or projected delinquency. Reamortizations or rescheduling of
                debt will be limited to 10 years beyond the original maturity date.
                Additionally, the following requirements must be met, as determined by
                RUS:
                 (a) The Borrower has cooperated with RUS in exploring alternative
                servicing options and has acted in good faith with regard to
                eliminating the delinquency and complying with its loan agreements and
                Agency regulations;
                 (b) Any management deficiencies identified by RUS have been
                corrected or the Borrower has submitted a plan acceptable to RUS to
                correct any deficiencies;
                 (c) The Borrower has presented a budget which clearly indicates
                that it is able to meet the proposed payment schedule and the
                reamortization or rescheduling of debt payments will ensure the
                continued financial viability of the Borrower;
                 (d) The Agency will consider the useful life of the facilities
                along with the level of debt service payments that the Borrower can
                contribute when determining the appropriate term to place on any
                reamortized loan; and
                 (e) Such other conditions as may be imposed by the Agency on a
                case-by-case basis, as determined by RUS.
                Sec. 1752.14 Deferment of principal and/or interest payments.
                 A deferment of principal and/or interest payments which will
                continue the original purpose of the loan may be approved subject to
                the conditions set forth in this section.
                 (a) Principal-only deferrals. In order to request a principal
                deferral, the Borrower must make a showing that at the end of the
                deferment period the Borrower's financial position has improved and the
                Borrower is able to make full principal and interest payments, curing
                any delinquency or projected delinquency. Deferments of principal will
                be limited to no more than 36 months. Additionally, the following
                requirements must be met, as determined by RUS:
                 (1) Any management deficiencies identified by RUS have been
                corrected or the Borrower has submitted a plan acceptable to RUS to
                correct any deficiencies;
                 (2) The Borrower has presented a budget which clearly indicates
                that it is able to meet the new proposed payment schedule and after the
                end of the deferral period is able to resume making full principal and
                interest payments while maintaining a positive cashflow position;
                 (3) Unless authorized by prior RUS written consent, the Borrower
                will only use funds otherwise due and payable under the RUS Note for
                the benefit of the broadband system. Such expenditures include, but are
                not limited to, costs to complete any necessary construction of the
                Project, costs to connect additional subscribers, marketing and sales
                costs, and other such costs that are necessary to maximize the value of
                the broadband system; and
                 (4) The Borrower will comply with such other conditions as may be
                imposed by the Agency on a case-by-cases basis, as determined by RUS.
                 (b) Principal and interest deferrals. A principal and interest
                deferral shall only be approved when the Borrower has demonstrated that
                it is the only option for the Agency to avoid foreclosure and is in the
                best interest of the Government to avoid a substantial loss to the
                Government. Additionally, principal and interest deferrals may be
                approved if the Borrower and RUS have agreed to a public sale of the
                broadband system and such a deferral is needed to provide time to
                complete the sale of the broadband system. Principal and interest
                deferrals will be limited to no more than 24 months, unless extended by
                the Agency for good cause and full cooperation of the Borrower.
                Additionally, the following requirements must be met, as determined by
                RUS:
                 (1) The Borrower has cooperated with RUS in exploring alternative
                servicing options and has acted in good faith with regard to
                eliminating the delinquency and complying with its Loan Documents and
                Agency regulations;
                 (2) Any management deficiencies identified by RUS have been
                corrected or the Borrower has submitted a plan acceptable to RUS to
                correct any deficiencies; and
                 (3) Unless authorized by prior RUS written consent, the Borrower
                will only use funds otherwise due and payable under the RUS Note for
                the benefit of the broadband system. Such expenditures include, but are
                not limited to, costs to execute a sale of the broadband system, costs
                to complete any necessary construction of the Project, costs to connect
                additional subscribers, marketing and sales costs, and other such costs
                that are necessary to maximize the value of the broadband system for an
                eventual sale;
                 (4) In cases when the Borrower and RUS have agreed to a public sale
                of the broadband system, the Borrower agrees that within 30 days of the
                execution of the deferral agreement, the Borrower will develop a
                process and timeline for the sale of the broadband system, in form and
                substance satisfactory to RUS, and will continually execute on those
                plans in order to effectuate a public sale of the broadband system; and
                 (5) The Borrower will comply with such other conditions as may be
                imposed by the Agency on a case-by-cases basis, as determined by RUS.
                Sec. 1752.15 Interest rate adjustments.
                 Interest rate reductions may be approved subject to the conditions
                set forth in this section. In order to request an interest rate
                reduction, the Borrower must make a showing that the Borrower does not
                have access to other sources of capital or alternatives to resolve the
                delinquency, and the interest rate adjustment will cure any existing or
                projected delinquency. Additionally, the following requirements must be
                met, as determined by RUS:
                 (a) The Borrower has cooperated with RUS in exploring alternative
                servicing options and has acted in good faith with regard to
                eliminating the delinquency and complying with its loan agreements and
                Agency regulations;
                 (b) Any management deficiencies identified by RUS have been
                corrected or the Borrower has submitted a plan acceptable to RUS to
                correct any deficiencies;
                 (c) The Borrower has presented a budget which clearly indicates
                that it is able to meet the proposed payment schedule and the interest
                rate reduction will improve the financial viability of the Borrower;
                 (d) The Borrower has agreed to not maintain cash or cash reserves
                beyond what is reasonable at the time of interest rate adjustment to
                meet debt service, operating, and reserve requirements; and
                 (e) The Borrower will comply with such other conditions as may be
                [[Page 10561]]
                imposed by the Agency on a case-by-cases basis, as determined by RUS.
                Sec. 1752.16 Transfer of collateral and assumption of debt.
                 A transfer of collateral and assumption of debt may be approved
                subject to the conditions set forth in this section. In order to
                request assistance under this section, the Borrower must make a showing
                that the transfer of collateral and assumption of debt will improve the
                likelihood that the government will be repaid and maximize the Agency's
                recovery on such loans. Such actions will be subject to the following
                requirements:
                 (a) The transfer will not be disadvantageous to the Government, as
                determined by RUS;
                 (b) The Agency has concurred to plans for disposition of funds in
                any reserve account, including project construction bank accounts;
                 (c) The transferee will assume all of the Borrower's
                responsibilities regarding the loan(s) and will accept the original
                loan conditions, as well as any others that may be imposed by the
                Agency;
                 (d) There must be no lien, judgement, or similar claims of other
                parties against the loan collateral being transferred, and once
                transferred, such collateral may not be subject to the lien, judgement,
                or similar claims of other parties of the transferee;
                 (e) Title to all assets must be conveyed to the transferee; and
                 (f) The Borrower will comply with such other conditions as may be
                imposed by the Agency on a case-by-case basis, as determined by RUS.
                Sec. 1752.17 Sale or exchange of loan collateral.
                 A cash sale of all or a portion of a Borrower's assets or an
                exchange of security property for Borrowers in a distressed situation
                may be approved subject to the conditions set forth in this section. In
                order to request assistance under this section, the Borrower must make
                a showing that the sale or exchange of collateral is in the best
                interest of the Government to avoid a substantial loss to the
                Government. Additionally, the following requirements must be met, as
                determined by RUS:
                 (a) If a sale of all of the assets, that the consideration is for
                the full amount of the debt or the present fair market value as
                determined by an independent appraiser that has been approved by RUS,
                and which addresses any conditions of the appraisal as may be imposed
                by RUS; and
                 (b) If the sale is for a portion of the assets, that the remaining
                property is adequate security for the loan and that the transaction
                will not adversely affect the Agency's security position; and provided
                that any proceeds remaining after paying reasonable and necessary
                selling expenses, as approved by the Agency in advance, are to be used
                for the following purposes:
                 (1) Repayment of the RUS debt, and other non-RUS debt if secured by
                a parity lien with the Agency; and/or
                 (2) Improvement of the broadband network or other facilities of the
                Borrower, including customer premise equipment and other equipment
                needed to upgrade the broadband network, if necessary to improve the
                Borrower's ability to repay the loan; and
                 (c) Any grant assets in the sale of collateral that were financed
                with Agency grants must follow the disposition rules as stated in the
                Loan Documents or Grant/Loan Documents.
                Sec. 1752.18 Sale of the note.
                 In the event of one or more incidents of default by the Borrower
                that cannot or will not be cured within a reasonable period of time,
                the Agency may sell the note. A decision to sell the note may be made
                when the Agency determines that the monetary default cannot be cured
                through the other actions as outlined in this part, or it has been
                determined that it is in the best interest of the Agency. The decision
                to sell the note should be made as soon as possible when one or more of
                the following exist:
                 (a) A loan is 90 days behind on any scheduled payment and the
                Agency and Borrower have not been able to cure the delinquency through
                actions such as those contained in this part;
                 (b) It is determined that delaying sale of the note will jeopardize
                full recovery on the loan; or
                 (c) The Borrower is uncooperative in resolving the delinquency or
                the Agency has reason to believe the Borrower is not acting in good
                faith, and it would improve the position of the Agency to sell the note
                immediately.
                Sec. 1752.19 Debt settlement.
                 Debts will not be settled directly by the Agency if:
                 (a) Referral to the Office of Inspector General and/or to Office of
                General Counsel is contemplated or pending because of suspected
                criminal violation;
                 (b) Civil action to protect the interest of the Government is
                contemplated or pending;
                 (c) An investigation for suspected fiscal irregularity is
                contemplated or pending;
                 (d) The Borrower is uncooperative in resolving the delinquency or
                the Agency has reason to believe the Borrower is not acting in good
                faith; or
                 (e) The debt has been referred to the Department of Justice, such
                as in bankruptcy proceedings.
                Sec. Sec. 1752.20-1752.24 [Reserved]
                Sec. 1752.25 Special terms.
                 If the Administrator determines the servicing actions in this part
                would not protect the Government's interest due to unique circumstances
                of the debtor, the Agency reserves the right to negotiate special terms
                to maximize the Government's recovery on the debt.
                Sec. 1752.26 No rights to special servicing actions.
                 Nothing in this part should be assumed guaranteed as a right to the
                Borrower for any of the special servicing actions noted in this part.
                Sec. 1752.27 Confidentiality of borrower information.
                 Borrowers are encouraged to identify and label any confidential and
                proprietary information contained in their applications. The Agency
                will protect confidential and proprietary information from public
                disclosure to the fullest extent authorized by applicable law,
                including the Freedom of Information Act, as amended (5 U.S.C. 552),
                the Trade Secrets Act, as amended (18 U.S.C. 1905), the Economic
                Espionage Act of 1996 (18 U.S.C. 1831 et seq.), and Communications
                Assistance for Law Enforcement Act (CALEA) (47 U.S.C. 1001 et seq.).
                Sec. 1752.28 Interest accrual.
                 (a) The Agency may determine to stop accruing interest if the
                account has remained delinquent for a period of 18 months or more, and
                the Agency has determined, in its sole discretion, that it will not
                recover the full outstanding principal balance on the loan.
                 (b) Notwithstanding paragraph (a) of this section, the
                Administrator may waive the accrual of interest on any outstanding
                delinquent debt, if in the sole determination of the Administrator,
                such waiver facilitates and maximizes the Government's recovery of the
                debt, such as under a voluntary foreclosure by the Borrower.
                Sec. 1752.29 Communications laws.
                 Borrowers must comply with all applicable Federal and state
                communications laws and regulations, including, for example, the
                Communications Act of 1934, as amended (47 U.S.C. 151 et seq.), the
                Telecommunications Act of 1996, as amended (Pub. L. 104-104, 110 Stat.
                56 (1996), and CALEA. For further information see http://www.fcc.gov.
                [[Page 10562]]
                Sec. 1752.30 Information collection and reporting requirements.
                 Copies of all forms and instructions referenced in this part may be
                obtained from RUS. Data furnished by Borrowers will be used to
                determine eligibility for certain servicing actions. Furnishing the
                data is voluntary; however, the failure to provide data could result in
                a servicing action being denied or the Agency taking adverse action
                against the Borrower to collect funds. The collection of information is
                vital to RUS to ensure compliance with the provisions of this part. The
                information collection requirements contained in this part have been
                approved by the Office of Management and Budget (OMB) under OMB Control
                Number 0572-0153.
                Sec. 1752.31 Authorized signatories.
                 Only the RUS Administrator can bind the Government to the
                expenditure of funds. Notwithstanding anything contained in this part,
                however, any settlement resulting in the reduction of $500,000 or more
                in payment to the Government, inclusive of attorney's fees, shall be
                approved by the Under Secretary for Rural Development, or higher.
                Chad Rupe,
                Administrator, Rural Utilities Service.
                [FR Doc. 2020-01891 Filed 2-24-20; 8:45 am]
                BILLING CODE P
                

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