§  54.1016   Letter of credit.

   (a) Before being authorized to receive 5G Fund support, a winning
   bidder shall obtain an irrevocable standby letter of credit which shall
   be acceptable in all respects to the Commission.

   (1) Each winning bidder that becomes authorized to receive 5G Fund
   support shall maintain the standby letter of credit in an amount equal
   to, at a minimum, one year of support, until the Administrator has
   verified that the support recipient serves at least 85 percent of the
   eligible square kilometers for which it is authorized to receive
   support in a state, and at least 75 percent of the eligible square
   kilometers in each eligible census tract, by the Year Six Final Service
   Milestone..

   (i) For Year One of a support recipient's support term, it must obtain
   a letter of credit valued at an amount equal to one year of support.

   (ii) For Year Two of a support recipient's support term, it must obtain
   a letter of credit valued at an amount equal to eighteen months of
   support.

   (iii) For Year Three of a support recipient's support term, it must
   obtain a letter of credit valued at an amount equal to two years of
   support.

   (iv) For Year Four of a support recipient's support term, and for each
   year thereafter unless the support recipient is allowed to reduce it
   pursuant to § 54.1015(b), it must obtain a letter of credit valued at an
   amount equal to three years of support.

   (v) A support recipient may obtain a new letter of credit or renew its
   existing letter of credit so that it is valued at an amount equal to
   one year of support once it meets its optional or required service
   milestones as specified in § 54.1015(b). The recipient may obtain or
   renew this letter of credit upon verification by the Administrator that
   it has deployed service that meets the 5G Fund deadlines as specified
   in § 54.1015(b) and performance requirements as specified in
   § 54.1015(c). The recipient may maintain its letter of credit at this
   level for the remainder of its deployment term, so long as the
   Administrator verifies that the recipient successfully and timely meets
   its remaining required interim and final service milestones.

   (vi) A support recipient that fails to meet its required interim
   service milestones must obtain a new letter of credit or renew its
   existing letter of credit valued at an amount equal to its existing
   letter of credit, plus an additional year of support, up to a maximum
   of three years of support.

   (vii) A support recipient that fails to meet two or more required
   interim service milestones must maintain a letter of credit valued at
   an amount equal to three years of support and may be subject to
   additional noncompliance penalties as set forth in § 54.1020.

   (2) The bank issuing the letter of credit shall be acceptable to the
   Commission. A bank that is acceptable to the Commission is:

   (i) Any United States bank:

   (A) That is insured by the Federal Deposit Insurance Corporation, and

   (B) That has a bank safety rating issued by Weiss of B−or better; or

   (ii) CoBank, so long as it maintains assets that place it among the 100
   largest United States Banks, determined on basis of total assets as of
   the calendar year immediately preceding the issuance of the letter of
   credit and it has a long-term unsecured credit rating issued by
   Standard & Poor's of BBB− or better (or an equivalent rating from
   another nationally recognized credit rating agency); or

   (iii) The National Rural Utilities Cooperative Finance Corporation, so
   long as it maintains assets that place it among the 100 largest United
   States Banks, determined on basis of total assets as of the calendar
   year immediately preceding the issuance of the letter of credit and it
   has a long-term unsecured credit rating issued by Standard & Poor's of
   BBB− or better (or an equivalent rating from another nationally
   recognized credit rating agency); or

   (iv) Any non-United States bank:

   (A) That is among the 100 largest non-U.S. banks in the world,
   determined on the basis of total assets as of the end of the calendar
   year immediately preceding the issuance of the letter of credit
   (determined on a U.S. dollar equivalent basis as of such date);

   (B) Has a branch office

   (i) Located in the District of Columbia; or

   (ii) Located in New York City, New York, or such other branch office
   agreed to by the Commission, that will accept a letter of credit
   presentation from the Administrator via overnight courier, in addition
   to in-person presentations; and

   (C) Has a long-term unsecured credit rating issued by a widely
   recognized credit rating agency that is equivalent to a BBB− or better
   rating by Standard & Poor's; and

   (D) Issues the letter of credit payable in United States dollars.

   (b) Before being authorized to receive 5G Fund support, a winning
   bidder shall obtain an opinion letter from its outside legal counsel
   clearly stating, subject only to customary assumptions, limitations,
   and qualifications, that in a proceeding under Title 11 of the United
   States Code, 11 U.S.C. 101 et seq. (the “Bankruptcy Code”), that the
   bankruptcy court would not treat the letter of credit or proceeds of
   the letter of credit as property of the winning bidder's bankruptcy
   estate, or the bankruptcy estate of any other winning bidder-related
   entity requesting issuance of the letter of credit, under section 541
   of the Bankruptcy Code.

   (c) Authorization to receive 5G Fund support is conditioned upon full
   and timely performance of all of the performance requirements set forth
   in § 54.1015(c), and any additional terms and conditions upon which the
   support was granted.

   (1) Failure by a 5G Fund support recipient to meet any of the service
   milestones set forth in § 54.1015(b) will trigger reporting obligations
   and the withholding of support as described in § 54.1020. Failure to
   come into full compliance during the relevant cure period as described
   in § 54.1020(b)(4)(ii) or § 54.1020(c) will trigger a recovery action by
   the Administrator set forth in § 54.1020(b)(4)(ii) or § 54.1020(c), as
   applicable. If the recipient authorized to receive 5G Fund support does
   not repay the requisite amount of support within six months, the
   Administrator will be entitled to draw upon the entire amount of the
   letter of credit and may disqualify the 5G Fund support recipient from
   the receipt of 5G Fund support or additional universal service support.

   (2) The default will be evidenced by a letter issued by the Chief of
   the Wireline Competition Bureau, or its respective designees, which
   letter, describing the performance default and attached to a standby
   letter of credit draw certificate, shall be sufficient for a draw on
   the standby letter of credit for the entire amount of the standby
   letter of credit.

   Effective Date Note: At  85 FR 75822 , Nov. 25, 2020, § 54.1016 was
   revised, however, paragraph (b) has a delayed effective date.