(a) Loans to industrial development authorities. Pursuant to the Finance Code, §34.201(b)(2), a loan or extension of credit to an industrial development authority or similar public entity created to construct and lease a plant facility, including a health care facility, to an industrial occupant is considered a loan to the lessee, provided that:
- (1) the bank documents the basis for its reliance on the industrial occupant as the primary source of repayment before the loan is extended to the authority;
- (2) the authority's liability on the loan is limited solely to whatever interest it has in the particular facility;
- (3) the authority's interest is assigned to the bank as security for the loan or the industrial occupant issues a promissory note to the bank that provides a higher order of security than the assignment of a lease; and
- (4) the industrial occupant's lease rentals are assigned and paid directly to the bank.
(b) Loans to leasing companies. Pursuant to the Finance Code, §34.201(b)(2), a loan or extension of credit to a leasing company for the purpose of purchasing equipment for lease is considered a loan to the lessee, provided that:
- (1) the bank documents the basis for its reliance on the lessee as the primary source of repayment before the loan is extended to the leasing corporation;
- (2) the loan is without recourse to the leasing corporation;
- (3) the bank receives a security interest in the equipment and, in the event of default, may proceed directly against the equipment and the lessee for any deficiency resulting from the sale of the equipment;
- (4) the leasing corporation assigns all of its rights under the lease to the bank;
- (5) the lessee's lease payments are assigned and paid to the bank directly by the lessee; and
- (6) the lease terms are subject to the same limitations that would apply to a state bank acting as a lessor under the Finance Code, §34.204.
Source Note:The provisions of this §12.7 adopted to be effective March 1, 1996, 21 TexReg 1383.