94-457 C.M.R. ch. 3
Summary: This rule establishes the procedures, standards and fees applicable to the Authority's determination regarding the issuance of a Certificate of Approval for bonds to be issued by the Loring Development Authority.
Certain terms used in this rule, which are defined in the Finance Authority of Maine Act, 10 M.R.S.A. Section 961 and following (the Act), shall have the meanings set forth in the Act, unless clearly specified otherwise or unless the context clearly indicates otherwise.
1. "Authority" means the Finance Authority of Maine.
2. "Borrower" means a person or entity that is the principal user of a project financed by bonds issued by the Loring Development Authority and includes the Loring Development Authority when appropriate.
3. "Certificate of Approval" means a certificate of the Authority recommending the terms of financing for a bond project, which recommendation may be subject to the satisfaction of reasonable conditions.
4. "Chief executive officer" means the Authority's chief executive officer or a person acting under the supervisory control of the chief executive officer.
5. "Members" means the members of the Authority's board of directors appointed pursuant to the Act.
6. "Project" means the facility, equipment or other business assets acquired or financed with the proceeds of bonds issued by the Loring Development Authority pursuant to 5 M.R.S.A. §13080-G (2).
7. "State" means the State of Maine.
The Loring Development Authority may request that the Authority issue a Certificate of Approval. Each request for a Certificate of Approval must be accompanied by:
General information identifying and describing the borrower, the proposed project, the proposed guarantors, if any, the proposed financing of the project as specified in the application form and as otherwise requested by the chief executive officer, and shall include evidence of management and planning capability of the borrower, evidence pertaining to the project's proposed plan of financing, including effective written commitments from all sources of financing for the project, evidence of the economic feasibility of the project, including market information and a business plan, a description of the proposed collateral, pro forma financial statements, historical financial statements, if applicable, guarantor and personal financial statements, if applicable, and such other evidence or information as the chief executive officer or the application form may reasonably require. The chief executive officer will review each application for completeness and eligibility. Applications that are not substantially complete may be deemed not received until completed and the chief executive officer shall promptly inform the Loring Development Authority of the basis for any such determination. The chief executive officer shall, in the reasonable exercise of discretion, determine when an application is received, which determination shall be final.
B. A nonrefundable application fee equal to 2% of the proposed financing amount up to a maximum fee of $10,000.
In undertaking its review of the Request for Certificate of Approval the Authority, and in addition to reviewing all materials submitted, may require reasonable analyses by third parties, including without limiting the foregoing: feasibility studies; appraisals; engineering, environmental and industry analyses, at the expense of the Loring Development Authority.
A. No application for a Certificate of Approval for a proposed project seeking a commitment of the moral obligation of the State will be approved unless the borrower, or the borrower and guarantor combined, meets or exceeds the following financial performance and collateral criteria, as determined by the Authority (provided that new ventures are not ineligible, but must clearly demonstrate the ability to be profitable or otherwise show on a pro forma basis the ability to satisfy the following criteria, as applicable):
1. Profitability for the most recent three years of operations, if available;
2. Minimum ratio of current assets to current liabilities of 1.25 to 1;
3. Maximum ratio of total debt to net worth of 3 to 1;
4. Minimum debt service coverage ratio of 1.25 to 1 (net income after taxes, plus interest and depreciation, divided by annual debt service, both current and proposed);
5. Recent financial performance consistent with the applicable median quartile of firms in comparable businesses as reported in RMA Annual Statement Studies, if
available.
6. Sufficient collateral on a discounted basis
In its discretion, the Authority may waive one or more of the above criteria if the Authority determines that the borrower has demonstrated a strong likelihood of being able to repay the loan, or in the event that the borrower causes to be provided to the Authority an irrevocable letter of credit or other similar instrument or undertaking which the Authority deems sufficient to provide adequate third party security for repayment of the loan and which is in form and content satisfactory to the Authority.
B. For all projects requiring financing in excess of $1,000,000 and in other instances where the authority determines it is appropriate, the authority shall obtain a written assessment from the Department of Environmental Protection of the environmental conditions known by the department to exist at a project location.
5. Approval by the members.
Prior to the Authority's issuance of a Certificate of Approval, the members shall consider the proposed issuance of a Certificate of Approval at a public meeting.
6. Terms and Conditions.
A. Loans must be secured by collateral having a fair market value (ordinarily determined by appraisal) sufficient to provide adequate security for the loan. The Authority may, in the reasonable exercise of its judgment, require assignments of leases or contracts in favor of the Loring Development Authority or one or more trustees acting on behalf of the bondholders, as applicable, secured or unsecured personal or corporate guarantees, and letters of credit.
B. Any project approved for a Certificate of Approval shall include covenants requiring the borrower to:
1. Make periodic payments of principal and interest;
2. Pay any taxes and governmental charges assessed against the borrower or the collateral;
3. Comply with all applicable federal, state and local laws, regulations and ordinances;
4. Make any lease payments imposed on borrower in connection with the project;
5. Obtain, maintain and pay for insurance against damage to or loss of the collateral;
6. Maintain and repair the collateral;
7. Permit the Loring Development Authority or its agent to inspect the collateral and to inspect and copy the borrower's books and records at any reasonable time;
8. Provide to the Loring Development Authority periodic financial reports in form
and content, at times and for periods acceptable to the Loring Development Authority and prepared by persons acceptable to the Loring Development Authority and also provide to the Loring Development Authority, when specifically requested, annual income tax returns;
9. Refrain from transferring any interest in the collateral without the Loring Development Authority's prior written consent;
10. Repay any advances necessary to protect the collateral or enforce the rights of the Loring Development Authority;
11. Execute such further assurances as may be reasonably required;
12. Keep the collateral free from liens and encumbrances not approved in advance in writing by the Loring Development Authority; and
13. If the bonds are tax-exempt, take such action as may be necessary to preserve the tax-exempt status of the bonds.
B. Optional Covenants.
In addition, the Authority may impose such other terms and conditions as it may reasonably deem prudent or desirable to assure sale of bonds at reasonable rates, completion and continuation of the project, preservation of collateral and repayment of the bonds.
7. Fees and Other Charges.
The Authority and the Loring Development Authority will enter into a contractual agreement that will provide for fees to be paid to the Authority for services provided in reviewing applications for Certificates of Approvals. Such contracts may be per project or for a set duration of time as determined by the Authority and the Loring Development Authority. The application fee charged pursuant to paragraph 2(B) above, will be applied to the fees charged pursuant to the contract described in this paragraph 7.
8. Waiver of Rule.
The chief executive officer may waive any requirement of this rule, except to the extent that the requirement is mandated by the Act, in cases where the deviation from the rule is insubstantial and is not contrary to the purposes of the program.
STATUTORY AUTHORITY: 10 M.R.S.A. Sections 969-A(14), 5 M.R.S.A. 13080-G(2)(C).
EFFECTIVE DATES:
June 7, 2004 - filing 2004-191