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The Standstill Agreement
As of June 24, 1985, the partnership’s outstanding balance
on its FFB loans was approximately $1.446 billion. An interest
payment of over $70 million and a principal payment of $328.5
million were payable to FFB on July 1, 1985. A guarantee fee of
$7.684 million was also payable to DOE on July 31, 1985.
To finalize the price support agreement, SFC required
approval from the Treasury Department, the Office of Management
and Budget, and DOE. Because SFC needed time to obtain these
approvals, and the partners were approaching a date when they
would have to make substantial payments under the loan documents,
the parties negotiated a “standstill agreement”. Under the
standstill agreement, dated June 24, 1985, the partnership’s due
date for interest, principal, and the guarantee fee payments was
extended to August 1, 1985.12
The standstill agreement also required the partners to
withdraw their November 18, 1983, notices of consideration of
termination of participation and to continue diligently to
complete construction of the project, making timely equity
investments into the partnership. Addressing the possibility
12 Under the standstill agreement, the parties agreed that
the in-service date would occur at the close of business on Aug.
1, 1985. The determination of the in-service date was of key
importance to the Government, because the pipelines’ obligation
to take or pay for all gas produced from the plant became fixed
upon the in-service date.
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