25 Pa. Code § 77.224 - Special terms and conditions for collateral bonds
(a) The Department will obtain and keep in
custody collateral deposited by the permittee until authorized for release or
replacement as provided in this subchapter.
(b) A collateral bond pledging negotiable
government securities is subject to the following conditions:
(1) The Department may determine the current
market value of government securities for the purpose of establishing the value
of the securities for bond deposit.
(2) The current market value shall be at
least equal to the amount of the required bond amount.
(3) The Department may periodically revalue
the securities and may require additional amounts if the current market value
is insufficient to satisfy the bond amount requirements for the
facility.
(4) The operator may
request and receive the interest accruing on governmental securities with the
Department as the interest becomes due. The Department will not make interest
payments for post forfeiture interest, accruing during appeals, and after
resolution of the appeals, when the forfeiture is adjudicated, decided or
settled in favor of the Commonwealth.
(c) A collateral bond pledging certificates
of deposit is subject to the following conditions:
(1) The Department will require that
certificates of deposit be assigned to the Department, in writing, and that the
assignment be recorded upon the books of the bank issuing the
certificates.
(2) The Department
will not accept an individual certificate of deposit for a denomination in
excess of the maximum insurable amount as determined by the Federal Deposit
Insurance Corporation (FDIC) and Federal Savings and Loan Insurance Corporation
(FSLIC).
(3) The Department will
require the banks issuing the certificates of deposit to waive rights of setoff
or liens which they have or might have against the certificates.
(4) The Department will accept only
automatically renewable certificates of deposit.
(5) The Department will require the permittee
to deposit sufficient amounts of certificates of deposit, to assure that the
Department will be able to liquidate the certificates prior to maturity, upon
forfeiture, for the amount of the bond required by this subchapter.
(6) The Department will accept only
certificates of deposit from banks or banking institutions licensed or
chartered to do business in this Commonwealth.
(7) The permittee will not be entitled to
interest accruing after forfeiture is declared by the Department, unless the
forfeiture declaration is ruled invalid by a court having jurisdiction over the
Department, and the ruling is final.
(d) A collateral bond pledging a letter of
credit is subject to the following conditions:
(1) The letter of credit shall be a stand-by
letter of credit issued by a Federally-insured or equivalently protected bank
or banking institution, chartered or authorized to do business in this
Commonwealth.
(2) A letter of
credit shall be irrevocable. The Department may accept a letter of credit which
is irrevocable for a term of 1 year if:
(i)
The letter of credit is automatically renewable for additional terms unless the
bank gives at least 90 days prior written notice to the Department and the
permittee of its intent to terminate the credit at the end of the current
term.
(ii) The Department has the
right to draw upon the credit before the end of its term and to convert it into
a cash collateral bond, if the permittee fails to replace the letter of credit
with other acceptable bond within 30 days of the bank's notice to terminate the
credit.
(3) The letter of
credit shall name the Department as the beneficiary and shall be payable to the
Department under 77.253(a)(1) (relating to procedures).
(4) A letter of credit shall be subject to
the most recent edition of the Uniform Customs and Practices for
Documentary Credits, published by the International Chamber of
Commerce, and the laws of the Commonwealth, including
13 Pa.C.S. §§
1101-9507 (relating to Uniform
Commercial Code).
(5) The
Department will not accept letters of credit from a bank that has failed to
make or delayed in making payment on a defaulted letter of
credit.
(e) Collateral
shall be in the name of the permittee, and shall be pledged and assigned to the
Department free and clear of rights or claims. The pledge or assignment shall
vest in the Department a property interest in the collateral which shall remain
until release under the terms of this chapter, and may not be affected by the
bankruptcy, insolvency or other financial incapacity of the operator. The
Department will insure that ownership rights to collateral deposited are
established to make the collateral readily available upon forfeiture. The
Department may require proof of ownership, and other means such as secondary
agreements, as it deems necessary to meet the requirements of this
chapter.
Notes
This section cited in 25 Pa. Code § 77.221 (relating to scope).
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