Or. Admin. R. 170-060-1010 - Terms, Conditions, and Reporting Requirements for an Agreement for Exchange of Interest Rates
(1)
Public bodies shall only enter into agreements for the exchange of interest
rates as authorized by, and in compliance with, ORS
287A.335.
(2) Amount. The notional amount of an
agreement that relates to outstanding borrowing may not exceed the outstanding
principal amount of the borrowing when the agreement is entered into. The
notional amount of an agreement that relates to a borrowing that the public
body expects to issue in the future may not exceed the principal amount of the
borrowing reasonably anticipated to be outstanding when payments are required
to commence under the agreement (as evidenced by a copy of the resolution,
minutes of the board or other authorizing directive of the director or board as
required by section 3 of this rule).
(3) Authorization. With respect to an
obligation or obligations that a public body has issued or will issue (as
evidenced by a copy of the resolution, minutes of the board or other
authorizing directive of the director or board), subject to ORS
287A.335 or as the same may be
amended in the future, the public body may designate the particular obligation
to which an agreement relates after execution of the agreement. Such a
designation after execution of the agreement shall be considered an agreement
modification, and the public body shall notify the MDAC of such modification in
accordance with this rule.
(4) Swap
Policy. The public body shall have adopted a swap policy as part of its ongoing
responsibility to manage its debt obligations. In adopting a swap policy, the
public body should review and consider the current edition of the Government
Finance Officers Association Recommended Practice: "Use of Debt-Related
Derivatives Products and the Development of a Derivatives Policy" and the "MDAC
Sample Interest Rate Swap Policy". Included in the swap policy, the public body
shall provide a general description of risks related to agreements for exchange
of interest rates and the means by which the public body will address those
risks. The swap policy shall also provide that an analysis of the risks and
benefits of each agreement shall be presented to the governing body prior to
executing such agreement.
(5) MDAC
Notice. The public body shall notify the MDAC of the execution of an agreement
for the exchange of interest rates by delivering to the OST, as provided in OAR
170-055-0001(3), within 30-days of its execution, the following:
(a) An MDAC Form 3.
(b) An executed copy of the resolution,
minutes of the board or other authorizing directive of the director or board,
specifically authorizing the public body to engage and participate in an
agreement for the exchange of interest rates. The authorization shall state the
reason that the public body is authorizing the agreement, shall include a
finding that the agreement is being executed for permitted purposes and
complies with the authorizing act and this rule.
(c) The public body's swap policy.
(d) The legal opinion, if any, addressing the
validity of the public body's obligations under the agreement for the exchange
of interest rates that is delivered in connection with the agreement.
(6) Terms. An agreement shall
contain terms and conditions consistent with the swap policy adopted by the
public body including, but not limited to:
(a)
The notional amount of the agreement;
(b) Payment terms;
(c) The term of the agreement;
(d) Insurance, collateral or other assurances
of payment provided in compliance with ORS
287A.335 or as the same may be
amended in the future;
(e)
Provisions for termination in advance of the scheduled term;
(f) Events of default and related
remedies;
(g) Assurances that the
counterparty will maintain a minimum rating with respect to its termination
payment obligations in one of the top three rating categories without gradation
by at least two nationally recognized rating agencies or that the
counterparty's obligations will be collateralized;
(h) Modifications to standard ISDA swap
documentation, as specified in the Schedule as may be required by the public
body's policy or governing law;
(i)
Limitations on allowable collateral and frequency of the valuation of such
collateral; and
(j) Agreement
valuation methodology.
(7) Ratings Reduction. The public body shall
notify the MDAC of any material change in the public body's obligations or
benefits under the agreement for the exchange of interest rates that result
from a reduction in the ratings of the public body, a counterparty or
guarantor.
(8) Modification or
Termination. If after executing an agreement for the exchange of interest
rates, the agreement is modified or terminated for any reason prior to its
stated end date, the public body shall notify the MDAC within 30-days after
completion of the modification and identify the reasons for such termination or
modification and the anticipated change in obligation to the public body
resulting from the termination or modification.
Notes
Stat. Auth.: ORS 287A.335
Stats. Implemented: ORS 287A.335
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