(a) The Arkansas Student Loan Authority may enter into an interest rate exchange agreement or similar agreement or contract with any person on a competitive or negotiated basis under terms and conditions determined by the authority, including terms regarding:
(1) Default;
(2) Early termination; and
(3) Indemnification for the loss of benefits.
(b) The authority may exercise the means necessary to manage an interest rate exchange agreement, including without limitation:
(1) Procuring insurance, letters of credit, or other credit enhancement;
(2) Providing security for the payment or performance of obligations; and
(3) Modifying, amending, or replacing an interest rate exchange agreement.
(c) The authority shall not enter into an interest rate exchange agreement unless:
(1) Either:
(A) The counterparty to the agreement has obtained a credit rating from one (1) or more nationally recognized statistical rating agencies that is at least equal to the lowest investment grade rating of any of the authority's bonds by a rating agency; or
(B) The payment obligations of the counterparty are unconditionally guaranteed by an entity with the credit ratings required by this subdivision (c)(1);
(2) The written agreement or contract provides that if the rating of the counterparty or of the guarantor of the counterparty falls below the rating level stated in subdivision (c)(1) of this section during the term of the agreement, the obligation of the counterparty or guarantor shall pay the aggregate security value of the contract to the authority that shall be collateralized by the counterparty's or guarantor's investment obligations to the extent required by the authority; and
(3) The authority files in its records a finding by independent financial advisors that the terms and conditions of the interest rate exchange agreement or similar agreement or contract reflect a fair market value regardless of whether the agreement was solicited on a competitive or negotiated basis.
(d) Before approving a contract for an interest rate exchange agreement or similar agreement or contract, the authority shall adopt guidelines for the use of an interest rate exchange agreement or a similar agreement or contract that include without limitation the:
(1) Methods for solicitation and procurement of an agreement;
(2) Standards and procedures for counterparty selection;
(3) Aspects of risk exposure associated with agreements;
(4) Types of agreements that may be entered into;
(5) Collateralization requirements imposed upon a counterparty or guarantor in the event of a rating agency downgrade; and
(6) Long-term implications associated with entering into agreements, including:
(A) Costs of borrowing;
(B) Historical trends;
(C) Potential impact on the future ability to redeem bonds, including opportunities to refund related debt obligations; and
(D) Other considerations.
(e) The authority may amend guidelines for an interest rate exchange agreement or similar agreement or contract and shall make the amended guidelines available for public inspection.
(f) The authority shall disclose each interest rate exchange agreement or similar agreement or contract in which the authority is a party to the Governor and the State Board of Finance within thirty (30) days of becoming a party to the agreement or contract.
Section: Previous 6-81-112 6-81-113 6-81-114 6-81-115 6-81-116 6-81-118 6-81-119 6-81-120 6-81-122 6-81-124 6-81-125 6-81-126 6-81-130 6-81-132Last modified: November 15, 2016