Criteria for Approval of a Moral Obligation Bond Issuance by the A&F Secretary

In order for a moral obligation bond issuance to receive the A&F Secretary's approval, the following criteria must be met: (1) The aggregate principal amount of all moral obligation bonds outstanding issued under St. 1968, c. 614, § 10, as amended by St. 2011, c. 9, § 21, shall not exceed $250 million; (2) The moral obligation bonds must be structured within the following parameters: (a) No derivative financial products as defined by 976 CMR 2.03: Definitions except for periodic resets of interest rates at a predetermined spread over an index at intervals no shorter than five years; (b) Clearly defined principal amortization with no balloon payment, i.e. principal must amortize throughout the term of the bond issue without substantial increase from year to year; (c) Annual debt service on the bonds may not exceed the amount annually payable by the Commonwealth to the borrower and available to be withheld by the Comptroller under St. 1968, c. 614, § 10, subsection(g)(8) in the event of default; (d) Bond term may not exceed the useful life of assets to be financed; (e) The Commonwealth shall have the right, but not the obligation, to pay off the bond issue in full if any payment default by the borrower remains uncured for a period of six months, as confirmed by the Agency. (f) Each bond issue must provide the Agency with a security interest in the assets financed, which shall give the Agency all of the rights and remedies of a secured party. (g) The borrower shall deposit to the Community Hospital and Community Health Center Capital Reserve Fund an amount equal to the maximum principal and interest due on the bonds in any one calendar year. (3) The borrower is not currently in default under a prior issuance of a moral obligation bond; (4) The borrower is not seeking to utilize the moral obligation bond issuance to refinance existing debt; (5) The terms and conditions of the bond issuance shall include provisions for an intercept agreement between the Commonwealth and the borrower; (6) The moral obligation bonds outstanding at any one time shall not exceed $5 million in the aggregate per borrower; (7) The project has been approved by the HHS Secretary under 801 CMR 56.07; (8) The borrower must provide to the A&F Secretary's satisfaction, under 801 CMR 56.00, evidence that: (a) The project borrower would be unable to obtain financing but for borrower's participation in the moral obligation bond program. Part of the documentation of this determination shall require the borrower to consent to its application for financing, and any supporting documentation, to be provided by the Agency to any third party lender(s); and, (b) The agency has determined, in its sole discretion, that the project meets its Underwriting Guidelines; and (9) As a condition of closing, borrower must obtain the written consent of any other lenders which have outstanding credit to the borrower.