§16373 Secured Loans

Summary

The Secretary may make secured loans to help pay for projects chosen under the program or to refinance construction or long‑term project debt when that refinancing gives extra money to finish, improve, or expand a qualifying project. Before making a loan, the Secretary and the Office of Management and Budget must figure out the needed federal credit subsidy, using the project’s credit factors. Loan money can also be used to pay certain fees the Secretary charges. Loans must follow terms the Secretary sets. A loan can be no more than 80 percent of the project’s expected eligible costs. Loans must be repaid from user fees, payments under public‑private deals, or other project revenues. The interest rate must be at least the yield on similar‑maturity U.S. Treasury securities on the loan signing date, though the Secretary may partially lower the rate if market yields rose between the application or master agreement date and the loan signing date; any cut can’t be more than 1½ percentage points (150 basis points). A loan must mature by the earlier of 35 years after substantial completion or the useful life of the asset. Loans generally can’t be made junior to other project debt in bankruptcy, except for some public agencies with existing senior bonds if the loan is A‑rated or better and paid from pledged revenues; in that case, the federal subsidy paid may be capped at 10 percent of the loan principal and the borrower must pay the rest. The Secretary may charge up to $3,000,000 in fees at financial close; the fee can be added to the loan principal by changing the loan terms. Total federal help for a project, including grants, cannot exceed 80 percent of eligible costs. Repayment schedules are based on project cash flow and life, must start no later than 5 years after substantial completion, and may allow deferred payments if the project cannot pay now (deferred amounts keep accruing interest). The Secretary can sell or reoffer loans after project completion with borrower notice but cannot change loan terms without the borrower’s written consent. Instead of lending, the Secretary may guarantee a lender’s loan if the budget cost is similar or lower, with similar loan rules except that rate and prepayment terms are set by the borrower and lender with the Secretary’s approval.