§604 — Title 23 Highways | U.S. Code

Summary

The Secretary can give a line of credit to a project borrower. That line is a promise to make a direct loan later if certain needs come up for a project chosen under section 602. The money can be used to pay debt service on project bonds, big repair or replacement costs, operation and maintenance, and costs from unexpected federal or state environmental rules. Before offering a line, the Secretary must work with the Office of Management and Budget and any rating agency that gave a preliminary rating to set a capital reserve subsidy. The line can only be funded if the project’s senior bonds get an investment-grade rating from two rating agencies. A line cannot be larger than 33 percent of the expected eligible project costs. Undrawn credit is available for 10 years after the project is substantially complete. Any draw becomes a direct loan and can be made only if the project’s net revenues (including capitalized interest but not required financing reserves) can’t cover those costs. The interest rate must be at least the yield on 30-year U.S. Treasury securities on the date the agreement is signed, unless another part of the law allows otherwise. The line must be paid back from tolls, user fees, public-private partnership payments, or other dedicated revenues that also back the main project bonds. It must include protections for repayment, like a rate promise or coverage requirement, and may have a lien on those revenues. Third-party creditors cannot make claims against the federal government over draws. The borrower may assign the line to lenders or a trustee. A loan from a draw is normally not subordinated to bondholders in bankruptcy, but the Secretary may waive that rule for certain public agencies if strict conditions are met; if waived, the federal subsidy for that loan cannot exceed 10 percent of the loan principal and the borrower must pay the rest. Fees may be charged to cover federal costs. A project that gets a line cannot also get a secured loan or guarantee that would make the federal share exceed 49 percent of eligible costs. Repayment terms are set based on projected cash flow and the asset’s useful life. Repayments must begin no later than 5 years after the 10-year availability period ends and must be fully paid within 25 years after that period ends.

Title 23, §604

Highways — Source: USLM XML via OLRC

(a)(1)Subject to paragraphs (2) through (4), the Secretary may enter into agreements to make available to 1 or more obligors lines of credit in the form of direct loans to be made by the Secretary at future dates on the occurrence of certain events for any project selected under section 602.

(2)The proceeds of a line of credit made available under this section shall be available to pay debt service on project obligations issued to finance eligible project costs, extraordinary repair and replacement costs, operation and maintenance expenses, and costs associated with unexpected Federal or State environmental restrictions.

(3)Before entering into an agreement under this subsection, the Secretary, in consultation with the Director of the Office of Management and Budget and each rating agency providing a preliminary rating opinion letter under section 602(b)(3), shall determine an appropriate capital reserve subsidy amount for each line of credit, taking into account the rating opinion letter.

(4)The funding of a line of credit under this section shall be contingent on the senior obligations of the project receiving an investment-grade rating from 2 rating agencies.

(b)(1)A line of credit under this section with respect to a project shall be on such terms and conditions and contain such covenants, representations, warranties, and requirements (including requirements for audits) as the Secretary determines to be appropriate.

(2)The total amount of a line of credit under this section shall not exceed 33 percent of the reasonably anticipated eligible project costs.

(3)Any draw on a line of credit under this section shall—

(A)represent a direct loan; and

(B)be made only if net revenues from the project (including capitalized interest, but not including reasonably required financing reserves) are insufficient to pay the costs specified in subsection (a)(2).

(4)Except as provided in subparagraphs (B) and (C) of section 603(b)(4), the interest rate on a direct loan resulting from a draw on the line of credit shall be not less than the yield on 30-year United States Treasury securities, as of the date of execution of the line of credit agreement.

(5)A line of credit issued under this section—

(A)shall—

(i)be payable, in whole or in part, from—

(I)tolls;

(II)user fees;

(III)payments owing to the obligor under a public-private partnership; or

(IV)other dedicated revenue sources that also secure the senior project obligations; and

(ii)include a rate covenant, coverage requirement, or similar security feature supporting the project obligations; and

(B)may have a lien on revenues described in subparagraph (A), subject to any lien securing project obligations.

(6)The full amount of a line of credit under this section, to the extent not drawn upon, shall be available during the 10-year period beginning on the date of substantial completion of the project.

(7)(A)A third-party creditor of the obligor shall not have any right against the Federal Government with respect to any draw on a line of credit under this section.

(B)An obligor may assign a line of credit under this section to—

(i)1 or more lenders; or

(ii)a trustee on the behalf of such a lender.

(8)(A)Except as provided in subparagraph (B), a direct loan under this section shall not be subordinated to the claims of any holder of project obligations in the event of bankruptcy, insolvency, or liquidation of the obligor.

(B)(i)The Secretary shall waive the requirement of subparagraph (A) for a public agency borrower that is financing ongoing capital programs and has outstanding senior bonds under a preexisting indenture, if—

(I)the line of credit is rated in the A category or higher;

(II)the TIFIA program loan resulting from a draw on the line of credit is payable from pledged revenues not affected by project performance, such as a tax-backed revenue pledge or a system-backed pledge of project revenues; and

(III)the TIFIA program share of eligible project costs is 33 percent or less.

(ii)If the Secretary waives the nonsubordination requirement under this subparagraph—

(I)the maximum credit subsidy to be paid by the Federal Government shall be not more than 10 percent of the principal amount of the secured loan; and

(II)the obligor shall be responsible for paying the remainder of the subsidy cost.

(9)The Secretary may establish fees at a level sufficient to cover all or a portion of the costs to the Federal Government of providing a line of credit under this section.

(10)A project that receives a line of credit under this section also shall not receive a secured loan or loan guarantee under section 603 in an amount that, combined with the amount of the line of credit, exceeds 49 percent of eligible project costs.

(c)(1)The Secretary shall establish repayment terms and conditions for each direct loan under this section based on—

(A)the projected cash flow from project revenues and other repayment sources; and

(B)the useful life of the asset being financed.

(2)All repayments of principal or interest on a direct loan under this section shall be scheduled—

(A)to commence not later than 5 years after the end of the period of availability specified in subsection (b)(6); and

(B)to conclude, with full repayment of principal and interest, by the date that is 25 years after the end of the period of availability specified in subsection (b)(6).

Notes & Related Subsidiaries

Editorial Notes

Amendments

2012—Pub. L. 112–141 amended section generally. Prior to amendment, section related to lines of credit. 2005—Pub. L. 109–59, § 1602(d), renumbered section 184 of this title as this section. Subsec. (a)(1). Pub. L. 109–59, § 1602(b)(4)(A), substituted “602” for “182”. Subsec. (a)(3). Pub. L. 109–59, § 1602(b)(4)(B), substituted “602(b)(2)(B)” for “182(b)(2)(B)”. Subsec. (b)(2). Pub. L. 109–59, § 1601(e)(1)(A), added par. (2) and struck out heading and text of former par. (2). Text read as follows: “(A) Total amount.—The total amount of the line of credit shall not exceed 33 percent of the reasonably anticipated eligible project costs. “(B) 1-year draws.—The amount drawn in any 1 year shall not exceed 20 percent of the total amount of the line of credit.” Subsec. (b)(3). Pub. L. 109–59, § 1601(e)(1)(B), substituted “but not including reasonably required financing reserves” for “, any debt service reserve fund, and any other available reserve”. Subsec. (b)(4). Pub. L. 109–59, § 1601(e)(1)(C), struck out “marketable” before “United States Treasury securities” and substituted “date of execution of the line of credit agreement” for “date on which the line of credit is obligated”. Subsec. (b)(5)(A)(i). Pub. L. 109–59, § 1601(e)(1)(D), inserted “that also secure the senior project obligations” after “sources”. Subsec. (b)(6). Pub. L. 109–59, § 1601(e)(1)(E), substituted “The full amount of the line of credit, to the extent not drawn upon,” for “The line of credit”. Subsec. (b)(10). Pub. L. 109–59, § 1602(b)(4)(C), substituted “603” for “183”. Subsec. (c)(2). Pub. L. 109–59, § 1601(e)(2)(A), struck out “scheduled” before “repayments”, inserted “be scheduled to” after “shall”, and substituted “to conclude, with full repayment of principal and interest,” for “be fully repaid, with interest,”. Subsec. (c)(3). Pub. L. 109–59, § 1601(e)(2)(B), struck out heading and text of par. (3). Text read as follows: “The sources of funds for scheduled loan repayments under this section shall include tolls, user fees, or other dedicated revenue sources.”

Statutory Notes and Related Subsidiaries

Effective Date

of 2012 AmendmentAmendment by Pub. L. 112–141 effective Oct. 1, 2012, see section 3(a) of Pub. L. 112–141, set out as an Effective and Termination Dates of 2012 Amendment note under section 101 of this title.

§604 Lines of Credit