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OMB issued regulations today as required by the Air Transportation Safety and System Stabilization Act, which establishes the Air Transportation Stabilization Board and authorizes it to issue loan guarantees and other Federal credit instruments up to $10 billion. These regulations are issued on a final basis and are effective upon publication.
The regulations are available on the following web site: www.omb.gov
Under the regulations:
The Board may enter into agreements with one or more borrowers to issue loan guarantees only if the Board determines that the borrower is an air carrier for which credit is not reasonably available; the intended obligation is prudently incurred by the borrower; and such loan guarantee is a necessary part of maintaining a safe, efficient, and viable commercial aviation system in the United States. The Board will determine the form and terms and conditions of the guarantee agreements into which it enters.
The Board must ensure that the Federal government is compensated for the risk it assumes in making guarantees. The Board may consider the degree to which the government can participate in the gains of the air carrier through warrants or other equity instruments. This section also requires the Board to issue guarantees only after an air carrier enters into a legal agreement with the Board regarding certain employee compensation.
The borrower must demonstrate that it has incurred or is incurring losses as result of the September 11, 2001 terrorist attacks. To qualify, an air carrier's losses cannot be covered by insurance, but the losses may be due to the unavailability of credit on reasonable terms or the decrease in demand for the air carrier's services. An eligible borrower must also agree to audits by the GAO and/or an independent auditor acceptable to the Board.
The Board is authorized to issue loan guarantees and other Federal credit instruments that, in aggregate, do not exceed $10 billion.
A guarantee issued by the Board must be less than 100% of the principal and accrued interest of the guaranteed loan.
A guaranteed loan must be payable within 7 years from the date of the first disbursement and have a reasonable rate of interest (as determined by the Board).
The Board shall approve or deny applications received on or before 5 p.m. EDT, June 28, 2002, in a timely manner as such applications are received at the Board's offices: US Department of the Treasury, 1500 Pennsylvania Avenue NW, Washington DC 20220.
Questions from applicants should be directed to the Deputy Assistant Secretary of the Treasury for Government Financial Policy at firstname.lastname@example.org or (202) 622-7073.
Further details on the application process are contained in the regulations.
U.S. Government Website