18 AAC 76.252 - Loan classifications
(a) The department
will determine an applicant to be qualified for a low-risk loan under this
subsection if the applicant provides an unencumbered pledge as security for the
loan. The pledge may be provided in the form of a general obligation bond from
a municipality or an obligation from a privately-owned utility. An obligation
from a privately-owned utility must be rated investment grade by a rating
service. The municipality's general obligation bond must be backed by the full
faith and credit of the municipality and be supported by unlimited ad valorem
taxing power as described in
AS
29.47.200. The department will qualify a loan
disbursed under this section for a discount of one half of one percent from the
finance charge assessed in
18 AAC
76.255(b)(2). As the department
determines necessary in order to adequately protect the Alaska drinking water
fund, reduce the department's risk, and ensure repayment, the department will
attach conditions to the loan that include
(1)
an unconditional obligation to pay from specific revenues, unless the
obligation is used for the letter of credit described in (6) of this
subsection;
(2) a rate covenant
equal to the coverage requirements of the loan and all liens;
(3) the obligation to impose and collect
revenues sufficient to pay
(A) system
operation, maintenance, and replacement costs;
(B) debt service; and
(C) any other financial
obligations;
(4) a
requirement to establish a reserve that is dedicated to the repayment of the
loan, and that is fully funded with cash or an approved equivalent;
(5) for a municipality, or for a municipality
and a privately-owned utility applying jointly, the obligation to comply with
the state aid intercept provisions of
AS
37.15.575; and
(6) for a privately-owned utility, a
requirement that the utility maintain a current irrevocable standby letter of
credit issued by a bank, in an amount sufficient to cover the department's loan
exposure, until the loan agreement has been in force for four years, the
project is complete, and the project is expected to continue to have
operational revenues sufficient to cover the department's loan
exposure.
(b) The
department will determine an applicant to be qualified for a standard loan
under this subsection if the applicant is unable or unwilling to qualify for
the loan type described in (a) of this section, and if the department
determines that the applicant has a credit rating and that risk factors do not
exist with the applicant's credit. As the department determines necessary in
order to adequately protect the Alaska drinking water fund, reduce the
department's risk, and ensure repayment, the department will attach conditions
to the loan that include
(1) dedicated pledged
revenues with a parity or greater position unless the pledged revenues are used
for the irrevocable standby letter of credit in (5) of this
subsection;
(2) a rate covenant
equal to the coverage requirements of the loan and all prior liens;
(3) the obligation to impose and collect
revenues sufficient to pay
(A) system
operation, maintenance, and replacement costs;
(B) any debt service; and
(C) any other financial
obligations;
(4) for a
municipality, or for a municipality and a privately-owned utility applying
jointly, the obligation to comply with the state aid intercept provisions of
AS
37.15.575; and
(5) for a privately-owned utility, a
requirement that the utility maintain a current irrevocable standby letter of
credit issued by a bank, in an amount sufficient to cover the department's loan
exposure, until the loan agreement has been in force for four years, the
project is complete, and the project is expected to continue to have
operational revenues sufficient to cover the department's loan
exposure.
(c) The
department will determine an applicant to be qualified for a discretionary loan
under this subsection if the applicant does not have a credit rating or if the
department determines that risk factors exist with the applicant's credit. The
department will not approve a loan under this subsection if the total principal
amount of all the outstanding loans of the discretionary type exceeds five
percent of the total assets of the Alaska drinking water fund. The department
will attach to a loan disbursed under this subsection a surcharge of two and
one-half percent in addition to the finance charge assessed in
18 AAC 76.255(b)(2) or
(3), as appropriate. As the department
determines necessary in order to adequately protect the Alaska drinking water
fund, reduce the department's risk, and ensure repayment, the department will
attach conditions to the loan that include
(1) pledged revenues that are sufficient to
repay the loan; those pledged revenues need not be necessarily sufficient to
pay all system operation, maintenance, and replacement costs;
(2) dedicated sources of revenue to repay the
loan that may have encumbrances or a less than parity position;
(3) for a municipality or a municipality and
a privately-owned utility applying jointly,
(A) the obligation to comply with the state
aid intercept provisions of
AS
37.15.575; and
(B) demonstration, by ordinance or
resolution, of economic and political support for the project, as determined by
the department;
(4) for
a privately-owned utility, a requirement that the utility
(A) maintain a current irrevocable standby
letter of credit issued by a bank, in an amount sufficient to cover the
department's loan exposure, until the loan agreement has been in force for four
years, the project is complete, and the project is expected to continue to have
operational revenues sufficient to cover the department's loan exposure;
and
(B) pledge unencumbered assets
as collateral.
(d) For purposes of this section, an
irrevocable standby letter of credit must be an approved arrangement where a
bank makes a payment to the department on behalf of the applicant, if the terms
and conditions of the loan agreement are not complied with. The terms and
conditions of the irrevocable standby letter of credit may not be changed
unless the bank and the department agree.
Notes
Authority: AS 37.15.575
AS 46.03.036
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