In Washington, the USDA adopted a bond mechanism into its Business & Industry Loan Guarantee Program to mirror what the DOE already had done in each of its Section 1703 and Section 1705 Loan Guarantee Programs.
The mechanism had been proposed in public comments submitted by Mintz Levin, Stern Brothers and Kreig DeVault. According to Mintz Levin’s Mark Riedy, “We expect that USDA shortly will issue final rules for its 9003 and 9007 loan guarantee programs adopting our bond finance mechanism and removing the US ownership restriction. Thus, foreign investors will be able to fully use the USDA programs, and all will be able to use our bond finance model using credit enhanced corporate debt from project companies in lieu of using any commercial debt whatsoever.
“Our bond model has up to a 2% lower interest rate than commercial debt,” added Riedy, “and provides a tenor of 15-25 years for our bond mechanism versus 1-7 years for commercial debt, and offers bond terms which are unavailable to those project developers relying exclusively on commercial debt. Plus, this bond mechanism is highly flexible versus the lack of flexibility inherent in commercial debt.”
Riedy confirmed that his team had filed client applications exceeding $1 Billion in the USDA Section 9003 Loan Guarantee Program in recent weeks, using hybrid financing models developed by the team.