ReConnect Financial Requirements 101 · 13 Financial Feasibility and Sustainability: •Sufficient...
Transcript of ReConnect Financial Requirements 101 · 13 Financial Feasibility and Sustainability: •Sufficient...
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USDA RUS ReConnect Program
ReConnect Financial Requirements 101
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Announcements
• Funding window has been extended to allow Applicants to access technical assistance provided by USDA
• Final funding windows were announced in a notice in the Federal Register on February 25, 2019
• Applications for the 100% Grant funding category will be accepted through May 31, 2019
• Applications for the 50/50 Loan/Grant Combination funding category will be accepted through June 21, 2019
• Applications for the 100% Loan funding category will be accepted through July 12, 2019
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Enable
technologies
critical to rural
communities.
Fuel long-term
economic
development in
rural America.
Bring high-speed
broadband to
rural areas that
lack access.
Support improved
access to education
and healthcare in
rural communities.
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100 Percent Loan
Applications will be accepted
on a rolling basis through
July 12, 2019.
July 12, 2019
50/50 Loan/Grant Combo
Applications will be
accepted through
June 21, 2019.
June 21, 2019
100 Percent Grant
Applications will be
accepted through
May 31, 2019.
May 31, 2019
Get Started
Application deadlines
released in notice in the
Federal Register.
Feb. 25, 2019
A New Way Forward
ReConnect Program and
funding opportunity announced
by Sec. Perdue.
Dec. 13, 2018
Officially Released
ReConnect Program Funding
Opportunity Announcement
released in the Federal Register.
Dec. 14, 2018
Check reconnect.usda.gov
The date that applications
will start being accepted will
be announced.
March 2019
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Program DesignKey Financial Components, ReConnect Products, and Eligible Costs
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• The construction or improvement of facilities, including buildings and land, required to provide broadband service
• Pre-application expenses (not to exceed 5% of the total award) – Costs must be incurred after the publication date of the FOA and be documented
• Terrestrial-based facilities for satellite broadband service
• Costs must be reasonable, allocable, and necessary
• Applications that propose to use any portion of the award or matching funds for any ineligible cost may be rejected
Eligible Project Costs
For 100% loans only
The acquisition of an existing system that does not
currently provide sufficient access to broadband
(limited to 40% of the total loan amount).
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• Applicant’s operating costs
• Costs incurred prior to the date on which the application was submitted, and with respect to eligible pre-application expenses, those costs incurred prior to the date of the publication date of the FOA
• Costs associated with an acquisition or merger of:• An affiliate;
• Any facilities or equipment of an affiliate; and
• A system previously funded by RUS
• Vehicles not used for construction
• Costs associated with the purchase of spectrum
• Costs associated with the operating leases of broadband facilities and IRUs
• Mobile service facilities
• A system that provides sufficient access to broadband
• To refinance outstanding debt
Ineligible Project Costs
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Key Financial Components of the ReConnectApplication
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Financial Requirements from the FOA:
• A financial pro forma (2015-2024), four years of historical data, current (bridge year) financials, and five years of projections
• Capital Investment Workbook (CIW) & Schedule
• The Applicant will also need to provide unqualified, audited financial statements for two full years preceding the date the application is submitted
Applicants Will Need to Submit…
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Financial Feasibility and Sustainability:
• Sufficient revenue to cover expenses
• Sufficient cash flow to cover all debt service obligations as they come due
• Positive ending cash balance for each year in the forecast period
• By the end of the five year forecast period, Applicants must meet two of the following three conditions:
• Debt service coverage ratio must be greater than or equal to 1.2x
• Times interest earned ratio must be greater than or equal to 1.2x
• Minimum current ratio must be greater than or equal to 1.2x
• Positive cash flow from operations at the end of the forecast period
Applicants Must Demonstrate…
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Amortization Period• The amortization period is equal to composite
economic life of the facilities plus three years
Interest Rate• The interest rate on the RUS loan component of the
50/50 Loan-Grant Combo will be set equal to the yield on a US Treasury Note with a comparable maturity – The applicable interest rate is determined at the time of each draw
Awardee Operations• The Agency reserves the right to withhold funds until
a management analysis profile (MAP) is completed after award
Three Year Deferral• The principal and interest will be deferred for the first
three years of the loan
Applicants Should Consider…
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USDA Required Security Features
• Loans must be secured by all assets, including all revenues of the awardee
• Grants must be secured by all grant assets
• USDA may share its first lien position with one or more lenders on a pari passu basis
• Applicants must submit a certification that prior lenders or lienholders on any awardee asset has agreed to sign the standard RUS intercreditor agreement or co-mortgage
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Detailed Overview of Required Application MaterialsFinancial Pro Forma; a Capital Investment Workbook & Schedule; and Unqualified, Audited Financial Statements
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Required Application Materials: A Financial Pro Forma (five year projection from first advancement)
• A financial pro forma (2015-2024) to provide four years of historical data, including current (bridge year) financials, and five years of projections:
• The bridge year shall be the year in which the application is submitted, and used as a buffer between the historical financial information and the forecast period
• The financial pro forma must include:• Income statement
• Balance sheet
• Statement of cash flows
• USDA will review the financial pro forma for the following:• Existing/expected debt burden over the forecast period
• The reasonableness of assumptions in their review of the financial pro forma
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Required Application Materials: A Capital Investment Workbook and Schedule• A Capital Investment Workbook (CIW) and Schedule (CIS) to
provide more detail on the assumptions that went into building the pro forma
• The Workbook and Schedule require Applicants to detail cost estimates and the timing of construction/project expenses over the buildout period
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Required Application Materials: Unqualified, Audited Financial Statements• Unqualified, audited financial statements for two full years
preceding the date of the application • For governmental entities, the unqualified, audited financial
statements must be accompanied with certifications as to unrestricted cash that may be available on a yearly basis
• For start up operations formed from partnerships of existing utility providers, audited financial statements for the previous two years are required for each partner – In addition, the partners must guarantee any loan component of the requested funding
• If applicants have parents or subsidiaries, it would be beneficial if the following was provided for USDA’s consideration:
• Parent company information (as applicable) – Historical financial statements, organizational chart, debt instruments
• Subsidiary information (as applicable) – Historical financial statements, organizational chart, debt instruments
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Supplemental Application Materials:Financial Information
• Applicant’s audited financial statements for the previous two years
• Evidence of Equity Infusion
• Federal/State Grant documents
• Funded debt instruments (RD, Other, Other LT Debt)
• Letters of Commitments and Term Sheets
• Obligations under capital leases, lease agreements
• Statements of affordability
• Alternative households supporting data
• Cost consultant certification
• UCC-1 Form
• Lines of Credit
• Competitive Analysis
• Bank account statements
• Other supporting documentation
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Income Statement
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Balance Sheet
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Statement of Cash Flows
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Post-Award Considerations
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Post-Award Financial Reporting Considerations
• Awardees must adopt a system of accounts for maintaining financial records acceptable to the Agency, as described in 7 CFR part 1770, subpart B
• Awardees must submit annual audited financial statements prepared by a CPA along with a report on compliance and on internal control over financial reporting, and a management letter in accordance with the requirements of 7 CFR part 1773
• USDA may conduct a Management Analysis Profile (MAP) that includes sending a team out to the Applicant’s’ offices
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Available ResourcesWhat resources are available and how you can get help during the application process
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• Workshops• Multiple Workshops to be held across the country
• Schedule is on the ReConnect website under “Events”
• RD experts and detailed application information
• Webinars• Multiple Webinars to be held
• Schedule is on the ReConnect website under “Events”• Materials are on the ReConnect website under “Forms and
Resources”
• RD experts and detailed application information
• Resources• ReConnect website https://reconnect.usda.gov• Electronic application intake system• Program FAQs
• OneRD Coordination• Resources across RD • Help Desk • Technical Assistance and support to Applicants
Available Resources
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ReConnect Support Desk
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For help or questions please contact us at