Sec. 32-261. Guarantees of loans and other investments.
Sec. 32-261. Guarantees of loans and other investments. (a) There is created
within the authority the Connecticut Works Guarantee Fund. The authority may issue
or make advance commitments to issue guarantees of loans and guarantees of other
investments. No guarantee or commitment to issue a guarantee shall be provided or
entered into by the authority pursuant to this section which would cause the aggregate
amount of all such guarantees and commitments then outstanding to exceed four times
the sum of the amounts available in the fund plus the amount of any unpaid grants
authorized to be made by the Department of Economic and Community Development
to the authority for deposit in the fund which remain available for purposes of the fund
pursuant to the bond authorization in section 32-262, provided the amount of any guarantee shall be measured by the portion of unpaid loan principal, or its equivalent in the
case of other investments, which is guaranteed by the authority and shall exclude for
purposes of such limitation the amount of any such guarantee to the extent that the
liability of the authority with respect thereto has been reinsured or otherwise assumed
by an eligible financial institution with a long-term credit rating equal to or higher than
that of the state. The purposes of such program shall be: (1) To encourage the growth
and retention of manufacturing firms and other businesses in the state that are unable
to obtain financing under reasonable terms and conditions due to the contraction in
liquidity in the banking system; (2) to stimulate the growth and retention of jobs, the
development of all geographic regions of the state and the increase in state and municipal
tax revenue; and (3) to address concerns with the availability of financing which has been
discontinued subsequent to a merger, takeover or liquidation of a financial institution by
a federal financial regulatory institution. The authority shall utilize the authority provided by this section to achieve the maximum creation or retention of jobs, especially
high quality, skilled jobs, with the funds available. There shall be deposited in the fund
all guarantee fees and all proceeds of collateral and other recoveries with respect to
payments made under guarantees and any and all other moneys or assets, other than
payments on guarantees issued hereunder, received by the authority in return for any
guarantee provided or offered, whether pursuant to any applicable contract or agreement
entered into by the authority under subsection (i) of this section or otherwise. Amounts
in the fund shall be used in accordance with this section to satisfy any valid guarantee
claim payable therefrom and may be used for any other purpose determined by the
authority to be in furtherance of any guarantee or any contract or agreement with an
eligible financial institution entered into pursuant to this section or determined by the
authority to be necessary or appropriate to protect the interests of the authority or the
fund, including, without limitation, protecting the interests of the authority in any project
during any period of loan delinquency or upon loan default. Any administrative expenses
incurred in carrying out the provisions of this section, to the extent not paid by the
authority, shall be paid from the fund. Each payment from the fund for such administrative expenses shall be made by the authority upon certification by the chairperson of
the authority that the payment is authorized under the provisions of this section, under the
applicable rules and regulations of the authority. Any amounts in the fund not currently
needed to meet the obligations of the fund and the expenses of the authority may be
invested in obligations designated by the authority, and all income from such investments shall become part of the fund.
(b) The authority may issue to eligible financial institutions, upon such terms and
conditions as the authority may determine, guarantees of loans and guarantees of other
investments the proceeds of which will be used for a business purpose whose economic
impact will be in this state.
(c) The authority shall determine which financial institutions are eligible to participate in the guarantee program consistent with any applicable principles set forth in the
participation guidelines for the loan guarantee program of the Connecticut Works Fund.
The authority shall encourage the participation of financial institutions of all sizes from
all regions of the state.
(d) (1) The authority may issue guarantees of loans and other investments, consistent with any applicable principles set forth in the eligibility guidelines for the loan
guarantee program of the Connecticut Works Fund, for any project used for manufacturing, industrial, research, product warehousing, distribution or other purposes which
will create or retain jobs, maintain or diversify industry, including new or emerging
technologies, or maintain or increase the tax base. The authority also may issue guarantees of loans and guarantees of other investments for other purposes if the authority
determines that such loans or other investments will materially contribute to employment in the state by creating high quality jobs, encouraging exportation beyond the state
of goods and services, developing new products or services, creating or supporting a
secondary market for business loans made within the state or otherwise supporting,
contributing to or enhancing activities important to employment levels in the state. The
authority may issue loan guarantees to women-owned businesses and minority business
enterprises. As used in this section, "women-owned business" means any business of
which fifty-one per cent or more of the capital stock, if any, or assets are owned by a
woman who is active in the daily affairs of the business and has the power to direct the
management and policies of the business and "minority business enterprise" shall have
the same meaning as in section 4a-60g.
(2) The authority shall not issue guarantees authorized under this section to guarantee loans for commercial real estate development projects or for passive real estate
ownership. The authority may issue guarantees for projects in which the borrower intends to purchase commercial real estate for use in its principal business operations.
(3) No guarantee shall be issued pursuant to this section for the financing or refinancing of any project unless the authority determines that the project is otherwise unable
to obtain financing in satisfactory amounts or under reasonable terms or conditions or
unless the authority determines that the borrower is unable to start, continue to operate,
expand, maintain operations or relocate to this state without such guarantee.
(4) No guarantee shall be issued pursuant to this section for the financing or refinancing of any project which the authority determines may be financed commercially,
upon reasonable terms and conditions, without such a guarantee, and which an eligible
financial institution nonetheless has attempted to shift into this program. The authority
shall determine whether a project has been inappropriately diverted into this program
consistent with the credit availability principles set forth in any applicable guidelines
for the loan guarantee program of the Connecticut Works Fund. The authority may
require the participating institution to submit its loan criteria and such other information
as may be appropriate, and in reviewing projects that involve the refinancing of existing
loans, may require submission of the classification assigned to that loan by examiners
for any federal financial regulatory institution.
(e) (1) The authority shall maximize the leveraging capability of guarantees under
this section to the extent feasible. The amount guaranteed shall not exceed forty per
cent of the principal amount of any particular loan or other investment, and the total
guarantee amounts for all outstanding loans or other investments guaranteed by the
authority under this section shall not exceed thirty per cent of the total principal amount
of all such loans and investments, except that in the case of a loan guarantee extended
in participation with the United States Small Business Administration, the amount guaranteed may be up to fifty per cent of the total principal amount of loans to a borrower,
and such loan guarantee may be disregarded for purposes of determining compliance
with such overall thirty per cent guarantee limitation, provided at least an equal percentage of the total principal amount of the loans to such borrower is guaranteed by the
United States Small Business Administration for at least the same term and otherwise
on substantially the same basis as the loan guarantee extended by the authority. The
term of any guarantee issued under this section shall not exceed twenty-five years.
(2) No more than ten million dollars of guarantees shall be issued for a single project.
No more than ten million dollars of guarantees shall be issued with respect to loans and
other investments to any one person or to any entity owned by, controlled by or under
common control with such person.
(3) No loan guarantee shall be issued to an eligible financial institution for any loan
or other investment to any executive officer or director of such institution, or to any
shareholder owning more than five per cent of the outstanding stock of such institution,
or any executive officer of any other eligible financial institution or any director or
shareholder owning more than five per cent of the outstanding stock of any such institution, or a member of the immediate family of such an executive officer, director or
shareholder or to any company or entity controlled by any such persons.
(f) The authority shall consider all proposals for guarantees submitted by eligible
financial institutions consistent with the due diligence principles set forth in any applicable loan presentation guidelines and underwriting considerations for the loan guarantee
program of the Connecticut Works Fund. The authority shall review and periodically
update its due diligence principles as appropriate.
(g) To carry out the purposes of this section, the authority shall have the powers set
forth in section 32-23e, provided no provision of section 32-23e shall be construed to
limit any power specifically granted to the authority under this chapter and no provision
of this chapter shall be construed to limit any power specifically granted to the authority
under section 32-23e.
(h) The authority is authorized from time to time to enter into guarantee agreements,
reimbursement agreements, participation agreements, collateral sharing agreements,
servicing agreements, and any other agreements or contracts with borrowers or recipients of other investments and with eligible financial institutions with respect to the fund
and any loan or other investment guarantee thereunder. Any such agreement or contract,
and any procedure of the authority, may contain terms, provisions or conditions necessary or desirable in connection with the program subject to the requirements established
by this section, including without limitation, terms, provisions and conditions relating
to loan documentation, review and approval procedures, origination and servicing rights
and responsibilities, default conditions, procedures and obligations, the payment of
guarantee fees, the giving of notice, claim procedures, the sources of payment for claims,
the priority of competing claims for payment, the release or termination of loan security
and borrower liability, the timing of payment, the maintenance and disposition of projects and the use of amounts received during periods of loan delinquency or upon default,
and any other provisions concerning the rights of guaranteed parties or conditions to
the payment of guarantees. Any fees for guarantees issued under the provisions of this
section may be determined on such basis, be payable by such person, in such amounts
and at such times as the authority shall determine, and the amount of the fees need not
be uniform among the various guarantees. The agreements or contracts may be executed
on an individual, group or master contract basis with eligible financial institutions.
(i) Any guarantee made by the authority under the authorization of this section shall
provide that claims payable under such guarantee shall first be paid from any amounts
readily available in the fund before any amounts available from the bond authorization
contained in section 32-262 are utilized for claim payment. The faith and credit of the
state is hereby pledged, pursuant to said bond authorization and in accordance with
section 3-20, to provide to the fund moneys as and when necessary to make timely
payments of all amounts required to be paid under the terms of any guarantee executed
by the authority pursuant to this section, but not in excess of the amount of bonds so
authorized by the State Bond Commission for such purpose less the amounts paid by
the state for deposit to such fund. The obligation of the authority to make payments
under any such guarantee shall be limited solely to such sources and shall not constitute
a debt or liability of the authority or the state.
(j) Any guarantee executed by the authority under this section shall be conclusive
evidence of eligibility for such guarantee, and the validity of any guarantee so executed
or of a commitment to guarantee shall be incontestable in the hands of an eligible financial institution holding such guarantee or commitment from the date of execution and
delivery thereof, except for fraud or misrepresentation on the part of such eligible financial institution and, as to commitments to guarantee, noncompliance with the commitment or authority rules or regulations in force at the time of issuance of the commitment.
(k) As used in this section, the following terms shall have the following meanings
unless the context indicates another meaning and intent:
(1) "Authority" means the Connecticut Development Authority created under subsection (a) of section 32-23d;
(2) "Eligible financial institution" shall have the same meaning as "eligible financial
institution", as defined in subsection (e) of section 32-23d;
(3) "Loans" means loans, notes, bonds and all other forms of debt financing or
extensions of credit, secured or unsecured, including loans for working capital purposes;
(4) "Other investments" means (A) any and all forms of equity financing made by
the authority or an eligible financial institution, (B) any participation or other interest
in such equity financing, however evidenced, or (C) any pool or portfolio of, or position
in, loans, such equity financing or any combination thereof;
(5) "Person" means a person, as defined in subsection (s) of section 32-23d; and
(6) "State" means the state of Connecticut.
(P.A. 92-236, S. 2, 48; P.A. 93-360, S. 10, 19; 93-382, S. 14, 69; 93-393, S. 1, 2; P.A. 95-250, S. 1; 95-334, S. 2, 13;
P.A. 96-211, S. 1, 5, 6; P.A. 98-246, S. 3, 4; June Sp. Sess. P.A. 98-1, S. 104, 121.)
History: P.A. 93-360 amended Subsec. (a) to create the Connecticut Works Guarantee Fund, limit the amount of
guarantees and commitments that may be provided or entered into pursuant to this section, require certain moneys and
assets to be deposited in fund and set forth purposes for which amounts in fund may be used, amended Subsec. (d) to
authorize guarantees of investments that will contribute to employment by "creating or supporting a secondary market for
business loans made within the state", made minor administrative and clarifying changes in Subsecs. (c) to (f), inclusive,
amended Subsec. (h) by adding provisions re construction of Sec. 32-23e and Ch. 588n, amended Subsec. (i) by substituting
"1996" for "1994" in Subdiv. (1) and "1999" for "1997" in Subdiv. (2) and added Subsecs. (j) to (l), inclusive, re authority
to enter into agreements and determination of fees for guarantees, re payment of claims and re validity of guarantees,
respectively, effective June 14, 1993; P.A. 93-382 deleted former Subsec. (g) re quarterly reports to general assembly
committees, review of reports by independent accounting firm and oversight hearings on reviews and former Subdiv. (2)
of Subsec. (i) containing further report provisions and relettered former Subsecs. (h) and (i) as (g) and (h), effective July
1, 1993; P.A. 93-393 amended Subsec. (d)(1) to authorize authority to issue loan guarantees to women-owned businesses
and minority business enterprises, effective July 1, 1993; P.A. 95-250 and P.A. 96-211 replaced Commissioner and Department of Economic Development with Commissioner and Department of Economic and Community Development; P.A.
95-334 amended Subsec. (a) by providing for payment of administrative expenses and allowing funds not currently needed
to be invested in obligations designated by the authority, amended Subsec. (e)(1) by adding a separate guarantee limit for
loan guarantees extended in participation with U.S. Small Business Administration, amended Subsec. (e)(2) by substituting
"guarantees" for "loan guarantees" in first sentence and applying second sentence to "guarantees ... with respect to loans
and other investments", amended Subsec. (e)(3) by clarifying that prohibition applies only to shareholders owning more
than 5% of the outstanding stock, amended Subsec. (h) by extending deadline for issuance of new guarantees from July
1, 1996, to July 1, 1998, and added Subsec. (l) defining terms applicable to section, effective July 1, 1995; P.A. 98-246
deleted former Subsec. (h) prohibiting issuance of new guarantees on or after July 1, 1998, and relettered remaining Subsecs.
accordingly, effective June 8, 1998; June Sp. Sess. P.A. 98-1 revised effective date of P.A. 98-246, but without affecting
this section.