Section 202.092. Guaranties of certain debt securities exempt  


Latest version.
  • (a) The exemption established by this section applies to a guaranty of a bond, as those terms are defined in subsection (d)(1) and (2), that is offered or sold in this Commonwealth.

    (b) Under the authority contained in section 202(i) of the act (70 P. S. § 1-202(i)), the Commission finds that it is not in the public interest nor necessary for the protection of investors to require the registration under section 201 of the act (70 P. S. § 1-201) of the guaranty of a bond if all of the following conditions are met:

    (1) The official statement or other disclosure document being utilized in connection with the offer and sale of the bonds contains either of the following:

    (i) An audited balance sheet and statement of income of the guarantor dated within 120 days prior to the commencement of the offering in this Commonwealth.

    (ii) Both of the following:

    (A) An audited balance sheet and statement of income of the guarantor for the most recent completed fiscal year; or if the fiscal year of the guarantor ended within 90 days prior to the commencement of the offering in this Commonwealth, an audited balance sheet and statement of income for the prior most recent completed fiscal year.

    (B) A statement by a certified public accountant or the guarantor as to whether there have been adverse material changes in the financial condition of the guarantor from the date of the audited balance sheet submitted in compliance with clause (A) within 5 days prior to the commencement of the offering in this Commonwealth.

    (2) The proceeds from the sale of the bonds are to be utilized for the benefit of a facility which is owned or operated—user—by either of the following:

    (i) A nonprofit corporation or other nonprofit entity which has been determined by the Internal Revenue Service to be an exempt organization described in 26 U.S.C.A. § 501(c)(3) or has received an opinion of counsel that it is so exempt, and where the combined net assets of the user and guarantor is not less than 25% of the amount of the securities being offered.

    (ii) An organization which has not been determined by the Internal Revenue Service or by an opinion of counsel to be an exempt organization under 26 U.S.C.A. § 501(c)(3), and where the combined net worth of the user and guarantor is not less than 50% of the amount of securities being offered.

    (3) Under the guaranty, the guarantor is required to do the following:

    (i) File with the trustee for the bondholders a copy of its audited balance sheet and statement of income within 120 days after the completion of its fiscal year.

    (ii) Be responsible for expenses incurred by the trustee for the bondholders in complying with paragraph (4)(ii) and (iii) unless there are specific provisions to the contrary in the relevant financing documents.

    (iii) Notify the trustee for the bondholders within 24 hours after it becomes insolvent as that term is defined in subsection (d)(4).

    (4) Under the trust indenture, mortgage, deed of trust or other similar agreement, the trustee for the bondholders, as that term is defined in subsection (d)(5), is required to do the following:

    (i) Maintain a current list of the names and addresses of all of the bondholders.

    (ii) Provide, to a bondholder, within 30 days of receipt of a written request from a bondholder, a copy of the guarantor’s most recent audited balance sheet and statement of income.

    (iii) Notify the bondholders of the occurrence of any of the following events no later than 30 days after an occurrence and inform the bondholders that a copy of the bondholders list described in subparagraph (i) will be provided within 30 days of receipt of a written request for the list:

    (A) The date the guarantor failed to comply with subsection (b)(3)(i).

    (B) The date the trustee receives a copy of the auditor’s report to the guarantor containing going concern disclosure as that term is defined in § 609.032(a) (relating to definitions).

    (C) The date on which the trustee is informed that the guarantor is insolvent as that term is defined in subsection (d)(4). There is no independent duty on the part of the trustee to determine the insolvency of the guarantor.

    (c) If the guarantor is a natural person, the guarantor may satisfy the requirements of this section relating to audited balance sheets and statements of income by providing a Statement of Financial Condition prepared utilizing the criteria contained in Personal Financial Statements Guide promulgated by the American Institute of Certified Public Accountants and accompanied by a Review Report as that term is defined in § 609.032(a).

    (d) The following terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise:

    (1) Bond—This includes only the following:

    (i) A bond, note, debenture or other evidence of indebtedness that is an exempt security under section 3(a)(2) of the Securities Act of 1933 (15 U.S.C.A. § 77c(2)) when the issuer of the security is located in this Commonwealth.

    (ii) A bond, note, debenture or other evidence of indebtedness that is an exempt security under section 3(a)(2) of the Securities Act of 1933 (15 U.S.C.A. § 77c(2)) but when the guaranty issued in connection with the bond, note, debenture or other evidence of indebtedness is deemed to be a separate security pursuant to United States Securities and Exchange Commission Rule 131 (17 CFR 230.131 (relating to definition of security issued under governmental obligations)).

    (2) Guaranty—A duly executed written agreement wherein a person, not the issuer, in connection with offer and sale of bonds in this Commonwealth, guarantees the prompt payment of the principal of, and interest on, the bonds whether at the stated maturity, at redemption prior to maturity or otherwise, and premium, if any, when and as the principal and interest shall become due and the guaranty cannot be bought, sold or traded as a security or otherwise realized upon by a bondholder separately from the bondholder’s interest in the bonds.

    (3) Guarantor—A person who executes a guaranty.

    (4) Insolvent—The inability of a guarantor to pay debts as they fall due in the usual course of business, or having liabilities in excess of the fair market value of assets. For purposes of this paragraph, a guarantor may not be considered insolvent if the auditor’s report to the guarantor’s audited balance sheet and statement of income did not contain a going concern disclosure as that term is defined in § 609.032(b).

    (5) Trustee for the bondholders—The person designated in the trust indenture, mortgage, deed of trust or similar agreement to act as trustee for the bonds.

The provisions of this § 202.092 adopted April 10, 1981, effective April 11, 1981, 11 Pa. B. 1252; amended February 7, 1986, effective February 8, 1986, 16 Pa.B. 384; amended January 8, 1999, effective January 9, 1999, 29 Pa.B. 202; amended July 11, 2003, effective July 12, 2003, 33 Pa.B. 3365; transferred and renumbered from 64 Pa. Code § 202.092, December 14, 2012, effective December 15, 2012, 42 Pa.B. 7533. Immediately preceding text appears at serial pages (317565) to (317568).

Notation

Authority

The provisions of this § 202.092 issued under sections 202(a), (c), (e) and (i) and 609(a) of the Pennsylvania Securities Act of 1972 (70 P. S. § § 1-202(a), (c), (e) and (i) and 1-609(a)).