§ 32-261 — Guarantees of loans and other investments.

Connecticut § 32-261

• Jurisdiction: Connecticut
• Title 32: Commerce and Economic and Community Development
• Ch. 588n: Credit, Jobs, Capital Investment and Tax Incremental Financing Programs

Text

(a) There is created within the corporation the Connecticut Works Guarantee Fund. The corporation 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 corporation 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 corporation 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 corporation and shall exclude for purposes of such limitation the amount of any such guarantee to the extent that the liability of the corporation 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 corporation 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 corporation in return for any guarantee provided or offered, whether pursuant to any applicable contract or agreement entered into by the corporation 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 corporation 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 corporation to be necessary or appropriate to protect the interests of the corporation or the fund, including, without limitation, protecting the interests of the corporation 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 corporation, shall be paid from the fund. Each payment from the fund for such administrative expenses shall be made by the corporation upon certification by the chairperson of the corporation that the payment is authorized under the provisions of this section, under the applicable rules and regulations of the corporation. Any amounts in the fund not currently needed to meet the obligations of the fund and the expenses of the corporation may be invested in obligations designated by the corporation, and all income from such investments shall become part of the fund. (b) The corporation may issue to eligible financial institutions, upon such terms and conditions as the corporation 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 corporation 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 corporation shall encourage the participation of financial institutions of all sizes from all regions of the state. (d) (1) The corporation 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 corporation also may issue guarantees of loans and guarantees of other investments for other purposes if the corporation 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 corporation 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” has the same meaning as provided in section 4a-60g . (2) The corporation shall not issue guarantees authorized under this section to guarantee loans for commercial real estate development projects or for passive real estate ownership. The corporation 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 corporation determines that the project is otherwise unable to obtain financing in satisfactory amounts or under reasonable terms or conditions or unless the corporation 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 corporation 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 corporation 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 corporation 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 corporation 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 corporation 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 corporation. 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 corporation 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 corporation shall review and periodically update its due diligence principles as appropriate. (g) To carry out the purposes of this section, the corporation 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 corporation under this chapter and no provision of this chapter shall be construed to limit any power specifically granted to the corporation under section 32-23e . (h) The corporation 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 corporation, 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 corporation 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 corporation 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 corporation 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 corporation to make payments under any such guarantee shall be limited solely to such sources and shall not constitute a debt or liability of the corporation or the state. (j) Any guarantee executed by the corporation 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 corporation rules or regulations in force at the time of issuance of the commitment. (k) As used in this section, the following terms have the following meanings unless the context indicates another meaning and intent: (1) “Corporation” means Connecticut Innovations, Incorporated created under subsection (a) of section 32-35 ; (2) “Eligible financial institution” has the same meaning as provided 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 corporation 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” has the same meaning as provided in subsection (s) of section 32-23d ; and (6) “State” means the state of Connecticut.

Legislative History

(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; P.A. 13-123, S. 29; P.A. 14-122, S. 155, 156.) 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; (Revisor's note: In 2013, references to “Connecticut Development Authority” and “authority” were changed editorially by the Revisors to “Connecticut Innovations, Incorporated” and “corporation”, respectively, to conform with changes made by June 12 Sp. Sess. P.A. 12-1, S. 148, 152); P.A. 13-123 amended Subsec. (k) to replace reference to Sec. 32-23d(a) with reference to Sec. 32-35(a) in Subdiv. (1), effective June 18, 2013; P.A. 14-122 made technical changes in Subsecs. (d)(1) and (k).