Financial Assurance—

Company Guarantee and Financial Test PURPOSE: This rule establishes procedures for obtaining approval from the director of the Department of Natural Resources of a financial assurance instrument in the form of a company guarantee. (1) Definitions. The terms defined in section (1) of this rule are used in the specifications for the financial test which shall accompany a company guarantee. The definitions are intended to assist in understanding the rule and are not intended to limit the term definitions in any way that conflicts with generally accepted accounting practices. (A) Assets. All existing and all probable future economic benefits obtained or controlled by a particular entity. (B) Company. The owner/operator of the metallic mineral waste management area. (C) Current assets. Cash or other assets or resources commonly identified as those which are reasonably expected to be realized in cash or sold or consumed during the normal operating cycle of the business. (D) Current liabilities. Obligations whose liquidation is reasonably expected to require the use of existing resources properly classifiable as current assets or the creation of other current liabilities. (E) Liabilities. Probable future sacrifices of economic benefits arising from present obligations to transfer assets or provide services to other entities in the future as a result of past transactions or events. (F) Net working capital. Current assets minus current liabilities. (G) Net worth. Total assets minus total liabilities and is equivalent to owner’s equity. (H) Owner/operator. Owner and operator. (I) Parent corporation. A corporation which directly owns at least fifty percent (50%) of the voting stock of the corporation which is the facility owner or operator; the latter corporation is deemed a subsidiary of the parent corporation. (J) Tangible net worth. The tangible assets that remain after deducting liabilities. These assets would not include intangibles such as goodwill and rights to patents or royalties. (2) Company Guarantee and Financial Test. The requirements for a financial assurance instrument may be satisfied by passing a financial test and submitting a letter from the company guaranteeing the required amount of financial assurance. A corporate guarantee submitted by the parent corporation of the owner/operator as specified in subsection (2)(J) of this rule may also be used to satisfy the requirement for financial assurance. (A) To pass the financial test the owner/operator must meet the criteria of either paragraph (2)(A)1. or 2. of this rule. 1. The owner/operator must have— A. Two (2) of the following three (3) ratios: a ratio of total liabilities to net worth less than 2.0; a ratio of the sum of net income plus depreciation, depletion and amortization to total liabilities greater than 0.1; and a ratio of current assets to current liabilities greater than 1.5; B. Tangible net worth at least three (3) times the required financial assurance covered by the test; and C. Total assets in Missouri amounting to at least three (3) times the required financial assurance covered by the test. 2. The owner/operator must have— A. A current rating for his/her most recent bond issuance of AAA, AA, A or BBB as issued by Standard and Poor’s or Aaa, Aa, A or Baa as issued by Moody’s; B. Tangible net worth at least three (3) times the sum of the required financial assurance covered by the test; and C. Total assets located in the state of Missouri amounting to at least three (3) times the sum of the required financial assurance covered by the test. (B) The phrase “required financial assurance” as used in subparagraph (2)(A)1.C. of this rule refers to the penal sum required by section 444.368, RSMo Supp. 1989 and named in the letter from the owner/operator’s chief financial officer (Appendix Form 1). The penal sum is one thousand dollars ($1000) for each acre or fraction of an acre of the metallic minerals waste management area but not less than twenty thousand dollars ($20,000) for each permit. (C) To demonstrate that s/he meets this test, the owner/operator must submit the following items to the director: 1. A form letter provider by the director, signed by the owner/operator’s chief financial officer and worded as specified on the form letter; 2. A copy of the independent certified public accountant’s report on examination of the owner/operator’s financial statements for the latest completed fiscal year; and 3. A special report from the owner/operator’s independent certified public accountant to the owner/operator stating that— A. S/he has compared the data which the form letter from the chief financial officer specifies as having been derived from the independently audited year-end financial statements for the latest fiscal year with the amounts in those financial statements; and B. No matters in connection with that procedure, came to his/her attention which caused him/her to believe that the specified data should be adjusted. (D) After the initial submission of items specified in subsection (2)(C) of this rule, the owner/operator must send updated information to the director within ninety (90) days after the close of each succeeding fiscal year. This information must consist of all three (3) items specified in subsection (2)(C) of this rule. (E) If the owner/operator no longer meets the requirements of subsection (2)(A) of this rule, s/he must send notice to the director of intent to establish alternate financial assurance. The notice must be sent by certified mail within ninety (90) days after the end of the fiscal year for which the year-end financial data show that the owner/operator no longer meets the requirements. The owner/operator must provide the alternate financial assurance within one hundred twenty (120) days after the end of that fiscal year. (F) The director, based on a reasonable belief that the owner/operator may no longer meet the requirements of subsection (2)(A) of this rule, may require reports of financial condition at any time from the owner/operator in addition to those specified in subsection (2)(A) of this rule. If the director finds, on the basis of these reports or other information, that the owner/operator no longer meets the requirements of subsection (2)(A) of this rule, the owner/operator must provide alternate financial assurance as noted in section 444.368, RSMo Supp. 1989 within thirty (30) days after notification of that finding. (G) The director may require and evaluate additional information which relates to financial status including present or potential environmental liabilities and may deny the use of the financial test based upon that evaluation or the failure of an applicant to provide any additional information requested by the director within thirty (30) days from the date of this request. Pending approval of the use of the test by the director or pending appeal before any court of competent jurisdiction of the director’s denial of the use of the test, the owner/operator shall comply with the financial assurance requirements through the use of an alternate financial assurance mechanism as noted in section 444.368, RSMo Supp. 1989. The burden of proof shall be on the applicant in the event of any appeal of a denial. If the director rules that the owner/operator’s financial test is unacceptable, the owner/operator shall have thirty (30) days from the date of notification of the decision to provide alternative financial assurances. (H) The director may disallow use of this test on the basis of qualifications in the opinion expressed by the independent certified public accountant in the report on examination of the owner/operator’s financial statements. An adverse opinion or a disclaimer of opinion will be cause for disallowance. The director will evaluate other qualifications on an individual basis. The owner/operator must provide alternate financial assurance as noted in section 444.368, RSMo Supp. 1989 within thirty (30) days after notification of the disallowance. (I) The owner/operator is no longer required to submit the items specified in subsection (2)(C) of this rule when— 1. An owner/operator substitutes alternate financial assurance as specified in section 444.368, RSMo Supp. 1989; or 2. The director releases the owner/operator from the requirements as specified in section 444.368, RSMo Supp. 1989. (J) An owner/operator may meet the financial assurance requirements of section 444.368, RSMo Supp. 1989, by obtaining a written guarantee, referred to in this rule as a corporate guarantee. The guarantor must be the parent corporation of the owner/operator. The guarantor must meet the requirements for owner/operators in subsections (2)(A)— (I) of this rule and must comply with the terms of the corporate guarantee. The wording of the corporate guarantee must be identical to the wording specified on the forms provided by the director to meet the guarantee. The corporate guarantee must accompany the items sent to the director as specified in subsection (2)(C) of this rule. The terms of the corporate guarantee shall provide that— 1. If the owner/operator fails to perform closure and/or inspection-maintenance of a disposal area covered by the corporate guarantee in accordance with the closure and/or inspection-maintenance plan and other permit requirements whenever required to do so, the guarantor will do so or establish alternate financial assurance as specified in section 444.368, RSMo Supp. 1989, in the name of the owner/operator; 2. The corporate guarantee will remain in force unless the guarantor sends notice of cancellation by certified mail to the owner/operator and to the director. Cancellation may not occur, however, during the one hundred twenty (120) days beginning on the date of receipt of the notice of cancellation by both the owner/operator and the director as evidenced by the return receipts; and 3. If the owner/operator fails to provide alternate financial assurance as specified in section 444.368, RSMo Supp. 1989, and obtain the written approval of the alternate assurance from the director within ninety (90) days after receipt of both the owner/operator and the director of a notice of cancellation of the corporate guarantee from the guarantor, the guarantor will provide alternative financial assurance in the name of the owner/operator. (3) Registration with Missouri Secretary of State. Any company or parent corporation providing financial assurance as specified in section 444.368, RSMo Supp. 1989, shall be registered with the Office of the Secretary of State to do business in Missouri. AUTHORITY: section 444.380, RSMo Supp. 1999.* Original rule filed Oct. 2, 1990, effective April 29, 1991. Amended: Filed Jan. 19, 2000, effective Sept. 30, 2000. *Original authority: 444.380, RSMo 1989, amended 1993, 1995.