45 U.S.C. § 720 — Obligations of Association

Page 172 TITLE 45—RAILROADS § 720 effective 90 days after Oct. 19, 1996. See subsec. (b)(2) of this section. § 720. Obligations of Association (a) General To carry out the purposes of this chapter, the Association is authorized to issue bonds, deben- tures, trust certificates, securities, or other ob- ligations (herein cited as ‘‘obligations’’) in ac- cordance with this section. Such obligations shall have such maturities and bear such rate or rates of interest as are determined by the Asso- ciation with the approval of the Secretary of the Treasury. Such obligations shall be redeemable at the option of the Association prior to matu- rity in the manner stipulated in each such obli- gation, and may be purchased by the Associa- tion in the open market at a price which is rea- sonable. (b) Maximum obligational authority The aggregate principal amount (exclusive of interest or additions to principal on account of accrual of interest) of obligations issued by the Association under this section which may be outstanding at any one time shall not exceed $395,000,000. No obligations or proceeds thereof shall be issued or made available after February 5, 1976, except— (1) to meet existing or potential commit- ments for loans under section 721 of this title made or applied for prior to January 1, 1976; and (2) for the purpose of providing loans pursu- ant to subsections (g) and (h) of section 721 of this title. (c) Guarantees The Secretary shall guarantee the payment of principal and interest on all obligations issued by the Association in accordance with this chap- ter and which the Association requests be guar- anteed. All guarantees entered into by the Sec- retary under this section shall constitute gen- eral obligations of the United States for the payment of which its full faith and credit are pledged. (d) Validity No obligation issued by the Association under this section shall be terminated, canceled, or otherwise revoked, except in accordance with lawful terms and conditions prescribed by the Association. Such an obligation shall be conclu- sive evidence that it is in compliance with this section, has been approved, and is legal as to principal, interest, and other terms. An obliga- tion of the Association shall be valid and incon- testable in the hands of a holder, except as to fraud, duress, mutual mistake of fact, or mate- rial misrepresentation by or involving such holder. (e) The Secretary of the Treasury If at any time the moneys available to the Secretary are insufficient to enable him to dis- charge his responsibilities under subsection (c) of this section or under subsection (a) of section 746 of this title, he shall issue notes or other ob- ligations to the Secretary of the Treasury in such forms and denominations, bearing such ma- turities, and subject to such terms and condi- tions as may be prescribed by the Secretary of the Treasury. Such obligations shall bear inter- est at a rate to be determined by the Secretary of the Treasury taking into consideration the current average market yield on outstanding marketable obligations of the United States of comparable maturities during the month pre- ceding the issuance of such obligations. The Sec- retary of the Treasury is authorized and di- rected to purchase any such obligations and for such purposes is authorized to use as a public debt transaction the proceeds from the sale of any securities issued under chapter 31 of title 31. The purposes for which securities may be issued under such chapter are extended to include any purchase of notes or other obligations issued under this subsection. At any time, the Sec- retary of the Treasury may sell any such obliga- tions, and all sales, purchases, and redemptions of such obligations by the Secretary of the Treasury shall be treated as public debt trans- actions of the United States. (f) Authorization for appropriations There are hereby authorized to be appro- priated to the Secretary such amounts as are necessary to discharge the obligations of the United States arising under this section. (g) Lawful investments All obligations issued by the Association shall be lawful investments and may be accepted as security for all fiduciary, trust, and public funds, the investment or deposit of which shall be under the authority and control of the United States or any officer or officers thereof. All such obligations issued pursuant to this section shall be exempt securities within the meaning of laws administered by the Securities and Exchange Commission. (Pub. L. 93–236, title II, § 210, Jan. 2, 1974, 87 Stat. 1000; Pub. L. 94–210, title VI, §§ 604, 607(k), Feb. 5, 1976, 90 Stat. 88, 97; Pub. L. 94–555, title II, § 203(e), Oct. 19, 1976, 90 Stat. 2620; Pub. L. 96–448, title VII, § 703(f)(3), Oct. 14, 1980, 94 Stat. 1965.) Editorial Notes CODIFICATION In subsec. (e), ‘‘chapter 31 of title 31’’ and ‘‘such chap- ter’’ substituted for ‘‘the Second Liberty Bond Act, as amended’’ and ‘‘such Act’’, respectively, on authority of Pub. L. 97–258, § 4(b), Sept. 13, 1982, 96 Stat. 1067, the first section of which enacted Title 31, Money and Fi- nance. AMENDMENTS 1980—Subsec. (e). Pub. L. 96–448 inserted ‘‘or under subsection (a) of section 746 of this title’’ after ‘‘sub- section (c) of this section’’. 1976—Subsec. (b). Pub. L. 94–555 inserted ‘‘(exclusive of interest or additions to principal on account of ac- crual of interest)’’ after ‘‘aggregate principal amount’’, and raised maximum amount allowed for outstanding obligations issued by Association to $395,000,000. Pub. L. 94–210, § 604, substituted provisions author- izing $275,000,000 as maximum of aggregate amount of obligations outstanding at any one time and provisions relating to availability or issuance after Feb. 5, 1976, for provisions authorizing $1,500,000,000 as maximum of aggregate amount of obligations outstanding at any one time and provisions relating to limitations on amounts issued to Corporation and available for reha- bilitation and modernization of rail properties. Page 173 TITLE 45—RAILROADS § 721 1 See References in Text note below. Subsec. (c). Pub. L. 94–210, § 607(k), inserted provisions relating to guarantees as general obligations of the United States and pledge of full faith and credit for payment. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1980 AMENDMENT Amendment by Pub. L. 96–448 effective Oct. 1, 1980, see section 710(a) of Pub. L. 96–448, set out as a note under section 1170 of Title 11, Bankruptcy. EFFECTIVE DATE OF 1976 AMENDMENT Amendment by Pub. L. 94–555 effective Oct. 1, 1976, see section 303 of Pub. L. 94–555, set out as a note under section 702 of this title. ABOLITION OF UNITED STATES RAILWAY ASSOCIATION AND TRANSFER OF FUNCTIONS AND SECURITIES See section 1341 of this title. APPLICABILITY OF NATIONAL ENVIRONMENTAL POLICY ACT Application of National Environmental Policy Act to actions of Commission not affected by title VI of Pub. L. 94–210, see section 619 of Pub. L. 94–210, set out as a note under section 791 of this title. § 721. Loans (a) General The Association is authorized, in accordance with the provisions of this section and such rules and regulations as it shall prescribe, to make loans to the Corporation, the National Railroad Passenger Corporation, and other rail- roads (including a railroad in reorganization which has been found to be reorganizable under section 77 of the Bankruptcy Act pursuant to section 717(b) of this title) in the region, for pur- poses of achieving the goals of this chapter; to a State or local or regional transportation author- ity pursuant to section 763 1 of this title; and to provide assistance in the form of loans to any railroad which (A) connects with a railroad in reorganization, and (B) is in need of financial as- sistance to avoid reorganization proceedings under section 77 of the Bankruptcy Act. No such loan shall be made by the Association to a rail- road unless such loans shall, where applicable, be treated as an expense of administration. The rights referred to in the last sentence of section 77(j) of the Bankruptcy Act shall in no way be affected by this chapter. (b) Applications Each application for such a loan shall be made in writing to the Association in such form and with such content and other submissions as the Association shall prescribe to protect reason- ably the interests of the United States. The As- sociation shall publish a notice of the receipt of each such application in the Federal Register and shall afford interested persons an oppor- tunity to comment thereon. (c) Terms and conditions Each loan shall be extended in such form, under such terms and conditions, and pursuant to such regulations as the Association deems ap- propriate. Such loan shall bear interest at a rate not less than the greater of a rate determined by the Secretary of the Treasury taking into con- sideration (1) the rate prevailing in the private market for similar loans as determined by the Secretary of the Treasury, or (2) the current av- erage yield on outstanding marketable obliga- tions of the Association with remaining periods of maturity comparable to the average matu- rities of such loans, plus such additional charge, if any, toward covering costs of the Association as the Association may determine to be con- sistent with the purposes of this chapter. (d) Modifications The Association is authorized to approve any modification of any provision of a loan under this section, including the rate of interest, time of payment of interest or principal, security, or any other term or condition, upon agreement of the recipient of the loan and upon a finding by the Association that such modification is equi- table and necessary or appropriate to achieve the policy declared in subsection (f) of this sec- tion. Notwithstanding any other provision of this section, in the case of a loan made under subsection (a) of this section to a railroad in the region, the Association is not required to make the findings with respect to subsections (e)(3) and (f) and may, upon the request of such rail- road— (1) continue to make advances to such rail- road pursuant to such loan, up to the total principal provided, as of November 8, 1978, under the agreement between such railroad and the Association under this section, upon finding only that (A) a good faith effort has been commenced by such railroad toward the establishment of an employee stock ownership plan, and (B) such continued advances will permit the continuation of rail service deter- mined by the Association, in the Final System Plan or under the goals of this chapter, to be desirable; and (2) increase the principal amount of such loan to such railroad, in an amount not to ex- ceed $7,500,000, only if the Association makes the finding referred to in paragraph (1)(B) of this subsection and determines that such rail- road is making a good faith effort to establish an employee stock ownership plan for review and approval by the Association. Any such ap- proval shall be conditioned upon a written commitment that by December 31, 1980, the railroad will adopt an employee stock owner- ship plan which will acquire qualifying em- ployer securities with a fair market value of $250,000. The Association may not take any action pursu- ant to the preceding sentence of this subsection after December 31, 1981. (e) Prerequisites The Association shall make a finding in writ- ing, before making a loan to any applicant under this section, that— (1) the loan is necessary to achieve the goals of this chapter or to prevent insolvency; (2) it is satisfied that the business affairs of the applicant will be conducted in a reason- able and prudent manner; and (3) the applicant has offered such security as the Association deems necessary to protect reasonably the interests of the United States.