Alberta Capital Finance Authority |
| The
Board of Directors of the Alberta Capital Finance Authority has approved
a number of changes to the current lending policies effective January
1, 2004. These changes are
significantly different from those that were proposed in the July 15,
2003 letter sent to all shareholders, and reflect your comments and concerns
on these proposals. The Authority
would like to thank those who called, prepared written responses and attended
our information sessions, for their comments and suggestions.
In general, the Authority will be able to continue to provide financing
with fixed payments and fixed rates. Revised
Lending Policies Timing The
Authority will loan funds four times per year, approximately: March 15, June 15, September 15 and December 15 It
is unlikely that we would have to delay lending around those dates except
where market conditions dictate.
This may cause a week or two delay.
Consideration will be given to varying the timing should the amounts
and structure of the loans be such to warrant a unique borrowing. Terms Fixed
loan terms can range up to 30-years depending upon the life of
the project and are based on terms previously established by ACFA. Repayment Loans
will normally be repaid on a semi-annual basis of equal payments including
interest and principal. Other
repayment structures will be considered to meet the cash flow needs of
borrowers but will be costed and included in the interest rates to reflect
the revised repayment structures.
Loans made up to December 31, 2003 will continue to have the same
repayment structures until paid out. Interest
Rates The
determination of interest rates will be based on a blended basis and include
administration costs related to the borrowing.
Currently this will include 2 basis points for administration costs
and 8 to 12 basis points for commission costs depending upon the terms
of borrowing. The interest
rate term does not necessarily have to have the same term as the repayment
term. (For example a borrower
can choose to reset the rate in year 10 of a 20-year amortizing loan.) It is likely that the rate charged for this ability to reset
will be a higher rate than for a loan where the interest term and principal
repayment term are the same. With
the provincial guarantee the Authority believes that even with fees being
passed onto the borrower, rates should be lower than the current rates. The
interest rate will be determined at the time ACFA borrows the funds to
meet the loan demand. Prepayment Prepayments
for loans excluding local improvement loans made prior to December 31,
2003 will continue to be subject to ACFA’s current prepayment policy.
Prepayments on the loans made after January 1, 2004 will be subject
to the full cost prepayment policy. Local
improvement loans made before December 31, 2003 will continue to be allowed
to be prepaid without penalty. Local
improvement loans made after January 1, 2004 will be subject to the full
cost prepayment policy. The
full cost prepayment policy for prepayments of local improvement loans
complies with the Municipal Government Act and should not be a burden
on the municipality. The
recommended prepayment calculation, which is included in the Department
of Municipal Affair’s “Municipal Resource Handbook”, will be revised to
provide that any penalty part of the discounted calculation be charged
to the ratepayer and not to the municipality.
This calculation is done on a present value basis and in each case
the prepayment should be less than the tax assessed for the local improvement. When calculating prepayments, please call ACFA to obtain the
current interest rate to be used. Proposed
Policies Not Implemented There
will be no sinking fund requirement or refinancing during the term of
the loan allowing repayments to be fixed.
In addition, an interim fund will not be set up as many of you
agreed that quarterly access to capital financing is sufficient. This will again be reviewed if it becomes an issue for some
of our borrowers. Lending
Requirements for 2004 As
noted earlier, in order to plan ACFA financing needs for 2004, we require
accurate estimates of the timing, amount, term and repayment structure
of your borrowing requirements.
Please consider these requirements carefully and complete and return
this estimate as soon as possible or by February 1, 2004. We
appreciate that it may be difficult to estimate exactly when these funds
are required, therefore you must notify the Authority within 30-days of
the quarterly dates established (March 15, June 15, September 15 and December
15) of changes to your borrowing requirements. If
you do not plan to borrow in 2004, please return a NIL form All
applications must be received 30-days before the quarterly date to be
included with the quarterly borrowing.
Borrowing by-laws must be valid or funds will not be advanced until
they are. For
those who are participating in the quarterly borrowings, the Authority
will call each of you to confirm your loan's current status prior to the
borrowing date. Once
the interest rate and costs are established, debentures will be sent to
you for execution and return. Funds
will then be advanced. This
process may take up to 5 days to complete so your response in finalizing
these debentures are critical. Debentures
will only require one duly authorized signature as a minimum unless you
require additional authorization. In
conclusion, the Authority would like to again thank those who responded
to the proposed changes and looks forward to establishing a much closer
working relationship with each of you.
In order to receive the most benefit and maintain maximum flexibility
under the new policies, cooperation between borrowers and ACFA is vital.
As we go forward under the new policies, we appreciate your patience
and understanding as our new procedures evolve.
If you have any further questions regarding these changes, please
do not hesitate to contact our office.
The Authority will continue to seek your input and comments to
ensure that maximum flexibility remains within the Authority’s financial
viability. |