Sec. 7. Borrowing power
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Each ownership investment company shall have authority to borrow money and to issue its securities, promissory notes, or other obligations under such general conditions and subject to such limitations and regulations as the Secretary may prescribe. To encourage the formation and growth of ownership investment companies the Secretary may, when authorized in appropriation Acts, guarantee the timely payment of all principal and interest as scheduled on debentures issued by ownership investment companies. Guarantees made under paragraph
(1)may be made by the Secretary on such terms and conditions as the Secretary deems appropriate, pursuant to regulations issued by the Secretary. The full faith and credit of the United States is pledged to the payment of all amounts that may be required to be paid under any guarantee under this subsection. Debentures guaranteed by the Department under this subsection shall be subordinate to any other debenture bonds, promissory notes, or other debts and obligations of an ownership investment company, unless the Secretary, in the exercise of reasonable investment prudence and in considering the financial soundness of such ownership investment company, determines otherwise. A debenture issued under this subsection may be issued for a term of not to exceed 15 years and shall bear interest at a rate not less than a rate determined by the Secretary of the Treasury, taking into consideration the current average market yield on outstanding marketable obligations of the United States with remaining periods to maturity comparable to the average maturities on such debentures, adjusted to the nearest 1/8 of 1 per centum, plus an additional charge, in an amount established annually by the Secretary, as necessary to reduce to 0 the cost (as defined in section 502 of the Federal Credit Reform Act of 1990 ( 2 U.S.C. 661a )) to the Department guaranteeing debentures under this Act, which amount may not exceed 1.38 percent per year, and which shall be paid to and retained by the Department. A debenture issued under this subsection— shall include such other terms as the Department may fix; and shall be subject to the following restrictions and limitations: The maximum amount of outstanding leverage made available to any 1 ownership investment company licensed under section 4(c) that is not a Protégé OIC may not exceed the lesser of— 100 percent of the private capital of such company; or $500,000,000. The maximum amount of outstanding leverage made available to 2 or more ownership investment companies licensed under section 4(c) that are commonly controlled (as determined by the Secretary) and not under capital impairment may not exceed $1,000,000,000. A Protégé OIC may not have multiple licenses under common control. The maximum amount of outstanding leverage made available under the facility established under section 3 to any 1 Protégé OIC may not to exceed the lesser of— 100 percent of the private capital of the Protégé OIC; or $100,000,000. In calculating the outstanding leverage of a company for the purposes of subclauses
(I)and
(II)of clause (i), the Secretary shall not include the amount of the cost basis of any covered investment made by the ownership investment company in a covered business concern that— conducts in the United States research and development, engineering, or production activities necessary or incidental to manufacturing; operates in a critical industry or critical technology area identified by the Secretary to be vital to maintaining the national or economic security of the United States; and is headquartered in the United States, or will be headquartered in the United States immediately following the transaction in the case of a covered investment described in section 2(6)(A). The exclusion of amounts in subclause
(I)shall not exceed a total of $75,000,000 or 25 percent of private capital of such company, whichever is less. Subclause
(I)shall not apply to any Protégé OIC. Nothing in this paragraph shall prevent licensees with 1 or more small business investment companies licensed under section 301(c) of the Small Business Investment Act of 1958 ( 15 U.S.C. 681 ) under common control (as determined by the Secretary), including licensees whose small business investment companies have received the maximum amount of leverage in sections 303(b)(2)(A) or 303(b)(2)(B) of that Act, from receiving the maximum amount of leverage in clause (i). The Secretary— may not permit a licensee having outstanding leverage to incur third-party debt that would create or contribute to an unreasonable risk of default or loss to the Federal Government; and shall permit any licensee to incur third-party debt only on such terms and subject to such conditions as may be established by the Secretary, by regulation or otherwise. Before approving any application for leverage submitted by a licensee under this Act, the Secretary— shall determine that the private capital of the licensee meets the requirements of section 6(a); and shall determine, taking into account the nature of the assets of the licensee, the amount and terms of any third-party debt owed by such licensee, and any other factors determined to be relevant by the Secretary, that the private capital of the licensee has not been impaired to such an extent that the issuance of additional leverage would create or otherwise contribute to an unreasonable risk of default or loss to the Federal Government. With respect to leverage granted by the Department to a licensee, the Department shall collect from the licensee a nonrefundable fee in an amount equal to 3 percent of the face amount of leverage granted to the licensee in the following manner: One percent upon the date on which the Department enters into any commitment for such leverage with the licensee. The balance of 2 percent (or 3 percent if no commitment has been entered into by the Department) on the date on which the leverage is drawn by the licensee. All fees and interest received and retained by the Department under this section shall be included in the calculations made by the Director of the Office of Management and Budget to offset the cost (as that term is defined in section 502 of the Federal Credit Reform Act of 1990 ( 2 U.S.C. 661a )) to the Department of guaranteeing debentures under this Act.
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