§ 936b. Sale or prepayment of direct or insured loans

Legislative history

Reconstructed from this section’s Code source credit and amendment notes, resolved against the local Statutes at Large. Editorial notes are evidence, not the law that made the change.

1. 1936

   Omnibus Budget Reconciliation Act of 1986

   Pub. L. 99–509 title I § 1011(a) · 100 Stat. 1874

   Enacted · 7 U.S.C. § 936b

   May 20, 1936, ch. 432, title III, § 306B, as added Pub. L. 99–509, title I, § 1011(a), Oct. 21, 1986, 100 Stat. 1876

   Source evidence

   Code source credit
   May 20, 1936, ch. 432, title III, § 306B, as added Pub. L. 99–509, title I, § 1011(a), Oct. 21, 1986, 100 Stat. 1876

   Enacted provision · exact public law section
   (a) Amendment to Rural Electrification Act of 1936.— The Rural Electrification Act of 1936 is amended by inserting after section 306 (7 U.S.C. 936) the following new sections: “SEC. 306A. PREPAYMENT OF LOANS. “(a) Except as provided in subsection (c), a borrower of a loan made by the Federal Financing Bank and guaranteed under section 306 of this Act may prepay such loan (or any loan advance thereunder) by paying the outstanding principal balance due on the loan (or advance), if— “(1) the loan is outstanding on July 2, 1986; “(2) private capital, with the existing loan guarantee, is used to replace the loan; and “(3) the borrower certifies that any savings from such prepayment will be passed on to its customers or used to improve the financial strength of the borrower in cases of financial hardship. “(b) No sums in addition to the payment of the outstanding principal balance due on the loan may be charged as the result of such prepayment against the borrower, the fund, or the Rural Electrification Administration. “(c) (1) A borrower will not qualify for prepayment under this section if, in the opinion of the Secretary of the Treasury, to prepay in such borrower’s case would adversely affect the operation of the Federal Financing Bank. “(2) Paragraph (1) shall be effective in fiscal year 1987 only for any loan the prepayment of the principal amount of which will cause the cumulative amount of net proceeds from all such prepayments made during such year to exceed $2,017,500,000. “(d) (1) The Administrator shall permit, subject to subsection (a), prepayments of principal on loans in fiscal year 1987 under this Ante, p. 710. section or Public Law 99–349 in such amounts as to realize net proceeds from all such prepayments in fiscal year 1987 in an amount not less than $2,017,500,000. “(2) The Administrator shall establish— “(A) eligibility criteria to ensure that any loan prepayment activity required to be carried out under this subsection will be directed to those cooperative borrowers in greatest need of the benefits associated with prepayment, as determined by the Administrator; and “(B) such other eligibility criteria as the Administrator determines are necessary to carry out this subsection. “(e) Any guarantee of a loan prepaid under this section shall be fully assignable under the provisions of section 306 of this Act and transferable. However, the Administrator may require that any such guarantee, if transfered or assigned, be transferred or assigned to a loan or security that, if sold, will be grouped with nonguaranteed loans or securities and sold in a manner to ensure that such sale will not unreasonably compete with the marketing of obligations of the United States. “Sec. 306B. SALE OR PREPAYMENT OF DIRECT OR INSURED LOANS. “A direct or insured loan made under this Act 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 Effective date. 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.”.

2. 1990

   Rural Economic Development Act of 1990

   Pub. L. 101–624 title XXIII § 2387 · 104 Stat. 3359

   1. Amended · 7 U.S.C. § 936b

      Pub. L. 101–624 designated existing provisions as subsec. (a)

   2. Added · 7 U.S.C. § 936b

      Pub. L. 101–624 added subsec. (b)

   Source evidence

   Code amendment note
   Pub. L. 101–624 designated existing provisions as subsec. (a) and added subsec. (b).

   Enacted provision · exact public law section
   SEC. 2387. MERGER OF CERTAIN RURAL ELECTRIC COOPERATIVES. Section 306B of the Rural Electrification Act of 1936 (7 U.S.C. 936b) is amended— (1) by inserting “(a)” before “A direct”; and (2) by adding at the end the following new subsection: “(b) Notwithstanding subsection (a), 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 Administrator 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 Administrator 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 Administrator 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 4.”.

3. 1992

   Rural Electrification Administration Improvement Act of 1992

   Pub. L. 102–428 § 2(a) · 106 Stat. 2183

   Amended · 7 U.S.C. § 936b(a)

   Pub. L. 102–428, § 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.”

   Source evidence

   Code amendment note
   Subsec. (a). Pub. L. 102–428, § 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.”

   Enacted provision · exact public law section
   (a) In General.— Subsection (a) of section 306B of the Rural Electrification Act of 1936 (7 U.S.C. 936b(a)) is amended to read as follows: “(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 Act 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 Act, 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 Administrator. “(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 Administrator 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 remain eligible for assistance under this Act in the same manner as other borrowers, except that— “(i) a borrower that has prepaid a loan, either before or after the date of enactment of this subsection, at a discount rate as provided by paragraph (3), shall not be eligible, except at the discretion of the Administrator, to apply for or receive direct or insured loans under this Act during the 120-month period beginning on the date of the prepayment; and “(ii) a borrower that prepaid a loan before the date of enactment of this subsection at a discount rate greater than that provided by paragraph (3), shall not be eligible— “(I) except at the discretion of the Administrator, 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 Administrator have entered into an agreement with respect to a prepayment occurring before the date of enactment of this subsection, this paragraph shall supersede any provision in the agreement relating to the restoration of eligibility for loans under this Act. “(C) Distribution borrowers.— A distribution borrower not in default on the repayment of loans made or insured under this Act 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 Act, 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 4. “(B) Insured loan.— The term ‘insured loan’ means a loan made under section 305.”.

4. 1992

   Rural Electrification Administration Improvement Act of 1992

   Pub. L. 102–428 § 2(b) · 106 Stat. 2183

   Inserted · 7 U.S.C. § 936b(b)

   Pub. L. 102–428, § 2(b), inserted heading

   Source evidence

   Code amendment note
   Subsec. (b). Pub. L. 102–428, § 2(b), inserted heading.

   Enacted provision · exact public law section
   (b) Conforming Amendment.— Section 306B(b) of such Act (7 U.S.C. 936b(b)) is amended by striking “(b) Notwithstanding” and inserting the following: “(b) Mergers of Electric Borrowers.— Notwithstanding”.

5. 1994

   Department of Agriculture Reorganization Act of 1994

   Pub. L. 103–354 title II § 235(a)(13) · 108 Stat. 3178

   Substituted · 7 U.S.C. § 936b

   Pub. L. 103–354 substituted “Secretary” for “Administrator” wherever appearing

   Source evidence

   Code amendment note
   Pub. L. 103–354 substituted “Secretary” for “Administrator” wherever appearing.

   Enacted provision · exact public law section
   (13) except as otherwise provided in this subsection, by striking “Administrator” each place it appears in such Act and inserting “Secretary”.

6 of 6 references resolved to an enrolled provision