Cal-Ore seeks authority to enter into a loan agreement with RUS and RTB for $6,711,750. Cal-Ore has previously made long-term secured borrowings from the United States of America, acting through the RUS (formerly the Rural Electrification Administration) and from the RTB1.
The proposed loan will be secured by previously executed mortgages and supplemental mortgages of substantially all of Cal-Ore's property to the RUS and the RTB, as previously authorized by the Commission and will be subject to documentation substantially similar to that which is attached as Exhibit C to the Application, changed only in the manner, if any, required for compliance with the published rules of the U.S. Department of Agriculture.
Cal-Ore further proposes that it will issue a mortgage note or notes (Mortgage Note) in substantially the same form as the Mortgage Note found in Exhibit C to the Application, subject only to similar required form changes, to provide for the long-term borrowing by Cal-Ore of a principal amount not exceeding $6,711,750 in the aggregate. To effect this transaction, Cal-Ore will execute an amendment to the existing loan agreement between it and the RUS and RTB (Telephone Loan Contract Amendment). The terms of the Telephone Loan Contract Amendment, as mandated by Federal regulations, will require Cal-Ore to purchase shares of Class "B" stock of the RTB in the same manner as previously approved by the Commission. As set forth in the Telephone Loan Contract Amendment and the Mortgage Note, money shall be advanced to Cal-Ore from time to time after the execution of the Mortgage Note.
Each advance under the Mortgage Note will bear interest at various rates, which shall be determined by terms set forth in the Mortgage Note. There is not a stated rate of interest for the RUS and the RTB's subsidized loans to telephone companies. Instead, the applicable rate of interest for advances under RUS and RTB loans is determined on the date of each advance and is essentially equal to the U.S. Government's cost of funds. The rates so determined are generally and consistently much lower than rates available from private and commercial lenders. The Commission has long recognized this differential and its advantage to Cal-Ore and Cal-Ore's subscribers. Pursuant to the Telephone Loan Contract, as amended, Cal-Ore is obligated from time to time to execute supplemental mortgages and other security instruments in favor of Cal-Ore's secured lenders.
Cal-Ore requests that it be authorized to continue to execute and deliver from time to time such supplemental mortgages and other security instruments as may be required by the terms of its Telephone Loan Contract, and to execute and deliver such Telephone Loan Contract or other extension agreements as may be required in the future to permit the further advance of funds under the Telephone Loan Contract.
1 Decision 87-06-023 dated June 15, 1987 for $875,700.