National Technical AssistanceRequest for Proposals (RFP)

SUMMARY: EDA solicits proposals for National Technical Assistance

projects, under 13 CFR Part 307, Subpart C (64 FR 5347) to undertake

and report on securitization of economic development loans from

revolving loan funds. EDA anticipates making three to five awards from

a total of $1.0 million available, subject to available funding in

fiscal year 1999.

DATES: Prospective applicants are advised that EDA will conduct a pre-

proposal conference on May 18, 1999, at 2:00 p.m. in the Department of

Commerce, Herbert C. Hoover Building, 14th and Constitution Avenue, NW,

Washington, DC 20230, Room 1412, at which time questions on this RFP

can be answered. Potential applicants are encouraged to provide written

questions (See Address section below) by May 11, 1999. Prospective

applicants unable to attend this pre-proposal conference may

participate by telephone conference. Teleconference information may be

obtained by calling (202) 482-4085 between 8:30-5:00 EDT on May 17,

1999.

EDA will also conduct pre-proposal conferences during the EDA

regional conferences in Boca Raton, FL (June 7-9, 1999), Dallas, TX

(June 4, 1999), and Long Beach, CA (April 27-29, 1999). To find out the

specific location and time of a regional pre-proposal conference,

contact David F. Witschi (202) 482-2659 or John J. McNamee (202) 482-

4085.

Initial proposals for funding under this program will be accepted

through June 21,1999. Initial proposals received after 5:00 p.m. EDT in

Room 7019, on June 21, 1999, will not be considered for funding. By

July 2, 1999, EDA will advise successful proponents to submit full

applications (containing complete proposals as part of the

application), OMB Control Number 0610-0094. Completed applications must

be submitted to EDA by July 16, 1999. EDA will make awards under this

RFP no later than September 30, 1999.

ADDRESSES: Send initial proposals to John J. McNamee, Director,

Research and National Technical Assistance Division, Economic

Development Administration, Room 7019, U.S. Department of Commerce,

Washington, DC 20230.

FOR FURTHER INFORMATION CONTACT: David F. Witschi, (202) 482-2659 or

John J. McNamee (202) 482-4085.

SUPPLEMENTARY INFORMATION:

I. Introduction

A. Authority

The Public Works and Economic Development Act of 1965, as amended

(Pub. L. 89-136, 42 U.S.C. 3121 et seq.), including the comprehensive

amendments by the Economic Development Administration Reform Act of

1998 (Pub. L. 105-393) (PWEDA) authorizes EDA to make grants for, among

other things, demonstrations of innovative activities or strategic

economic development investments (42 U.S.C. 3147). Pub. L. 105-277

makes funds available for this program.

B. Catalog of Federal Domestic Assistance

11.303 Economic Development-Technical Assistance Program.

C. Program Description

For a description of this program see PWEDA and 13 CFR Chapter III,

Part 307 (64 FR 5347).

II. Area of Special Emphasis

EDA invites proposals to design, undertake, and evaluate

transactions demonstrating securitization of economic development loans

in a variety of EDA-funded Revolving Loan Fund (RLF) portfolios. For

the purposes of this project, EDA defines securitization transactions

to include sales of loans, pledging the future income stream of a loan,

and similar secondary market activities. This demonstration program is

designed to generate successful transactions that can serve as models

for use by federal, state, or nonprofit entities for future

transactions. At this time, EDA does not endorse or indicate any

preference for any particular securitization technique or method. EDA

does recognize, however, in viewing this as a demonstration program,

that the cost of completing a transaction may be higher and the return

to participating RLFs lower than would eventually be expected once

securitization of economic development loans becomes a more established

practice.

A. Background

Current estimates suggest that there may be as many as several

thousand RLFs involved in economic development lending with total

assets of several billion dollars. These RLFs have been created over

the past 20 years with funding from a variety of federal, state, and

nonprofit sources. EDA alone has capitalized more than 400 RLFs, with

nearly $700 million in assets (See 13 CFR Part 308 (64 CFR 5347) for a

program description). EDA RLFs are located throughout the country and

are managed by states, local units of government, Economic Development

Districts and nonprofit organizations engaged in economic development.

To date, only a handful of secondary market transactions involving RLF-

sourced economic development loans have been undertaken. EDA is

interested in expanding the secondary market for economic development

loans as a cost-effective and fiscally sound means of leveraging the

capital available to RLFs. Until greater experience is gained in making

actual transactions, the costs of securitization will remain high and

economic development loans will draw little interest from potential

investors. This demonstration project will allow EDA and other entities

involved in economic development lending to gain experience, expertise

and knowledge required to develop securitization standards, guidelines

and other requirements necessary to make securitization an effective

and fiscally sound strategy for funding economic development. The

demonstration program will also stimulate further interest in economic

development loan programs by the secondary investment community.

B. Scope of Work

The successful applicant(s) will:

(1) Propose an actual securitization transaction that includes

loans from an EDA-funded RLF. EDA will not consider proposals limited

to feasibility studies or examination of hypothetical transactions. The

proposal need not identify specific buyers and sellers, but it should

describe how buyers and sellers will be determined.

(2) Make a sincere, good faith effort to complete the proposed

transaction.

(3) Include a plan to ensure competitive pricing.

(4) Address the impact the securitization may have on RLF

borrowers.

(5) Provide information generated by the transaction to assist EDA

and others in their efforts to:

Identify those characteristics of loans and loan funds

that influence the success or failure of securitization efforts.

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Identify the different range of securitization approaches

available, as well as their relative benefits, costs and possible

markets.

Develop RLF loan documentation standards as well as

standards for critical RLF organizational procedures and practices.

Identify and quantify the importance of specific factors

that contribute to any discount of the loans securitized. These factors

may include reduced profitability and increased risk of the loans due

to: (a) Economic development lending policies; (b) actual performance

characteristics of the RLF loans and borrowers; (c) the quality of

documentation, underwriting standards and loan servicing practices of

the RLF lender(s); and/or (d) the scarcity of actuarial information on

economic development lending.

Determine if securitization is influencing subsequent loan

selection, evaluation, servicing, or other fund management practices.

EDA anticipates this will include a program of voluntary follow-on

monitoring after the project is completed.

Address the effect of discounted transactions (especially

if repeated) on the ability of the RLF to sustain itself.

While information gathered from each transaction may be different,

this information is expected to help other RLFs interested in preparing

portfolios for future securitization. The information gathered in the

demonstration program is expected to be disseminated by EDA to the

broader economic development lending community.

(6) Prepare a final report documenting lessons learned from the

securitization that may help future securitization participants.

C. Additional Requirements

The successful applicant(s) must:

(1) Demonstrate that each participating RLF needs, and can utilize,

further capitalization within a reasonable time frame.

(2) Propose securitization methods or techniques that are generally

expected to be replicable.

(3) Not use federal funds for loan guarantees or other activities

designed to influence market prices by artificially enhancing the

credit-worthiness of loans to be sold.

(4) Describe how transaction proceeds will be used and disbursed.

In the case of an EDA-funded RLF, any net proceeds of a securitization

(after transactions costs are paid) must be applied toward new loans in

accordance with the original lending plan of the RLF or a subsequent

plan approved by EDA.

Successful applicant(s) will incorporate one or more of the

following features in the proposed securitization(s). (Note:

incorporation of all features is not required and, in fact, several of

the following are mutually exclusive.) A proposed securitization may:

(1) Be limited to the loans of a single RLF, or be subregional,

regional or national in scope.

(2) Involve loans from both urban and rural RLFs; Economic

Development District operated RLFs; community based organization RLFs;

and RLFs sponsored by other federal, state, and local government

agencies. RLFs funded by non-EDA sources are responsible for securing

appropriate and timely approvals of their funding agencies before a

transaction is completed.

(3) Demonstrate innovative techniques for loan pooling from

different RLF portfolios. This is intended to encourage willing and

qualified RLFs to participate, regardless of portfolio size.

(4) Be transacted either by public offering or private placement.

(5) Use credit enhancement techniques provided they do not require

an additional federal subsidy.

(6) Include rating of issues by recognized rating services.

D. Costs

Ordinarily, the applicant is expected to provide a 50% nonfederal

share of project costs. However, the Assistant Secretary may waive the

required 50% matching share of the total project costs, provided the

applicant can demonstrate: (1) the project is not feasible without, and

the project merits such a waiver, or (2) the project is addressing

major causes of distress in the area serviced and requires the unique

characteristics of the applicant, which will not participate if it must

provide all or part of a 50 percent nonfederal share, or (3) the

project is for the benefit of local, state, regional, or national

economic development efforts, and will be of no or only incidental

benefit to the recipient (See 13 CFR 307.9; 64 FR 5429).

For the purposes of this demonstration project, EDA funds may be

used to pay for:

Professional fees associated with the transaction,

including, but not limited to, financial advisors, trustee and legal

expenses and for the cost to perform due diligence. In the event a

transaction is completed successfully, such costs are expected to be

recovered from the transaction proceeds, and may be retained by the

applicant and/or participating RLFs for uses approved by EDA. Such

reuse of EDA funds should be described in the proposal (See item C (4)

above).

Organizational and administrative fees and expenses,

including direct salaries of applicant staff involved with the

securitization.

Other costs normally eligible under EDA's Technical

Assistance Program.

E. Timing

Each project will begin on the date specified in the grant award,

which shall be on or before September 30, 1999. Each securitization

transaction must be completed no later than nine months after the date

of approval of the grant. A final report and evaluation must be

submitted to EDA within 90 days of completion of the securitization

transaction.

F. Briefings and Workshops

Each award includes a requirement that the applicant conduct a

total of up to three briefings or training workshops for individuals

and organizations interested in the results of this project. Potential

applicants should be aware that the completion dates set forth below

are for completed transactions and submission of the final written

report. Briefings/workshops will take place no later than one year

after submission of the final report. Locations and dates of the

briefings/workshops are at EDA's discretion. Most likely, this will

include one briefing in Washington, DC, with the other briefings/

workshops held in conjunction with one or more of EDA's regional

conferences.

III. How to Apply

A. Eligible Applicants

See EDA's interim final rule at 13 CFR 300.2 (64 FR 5347). Eligible

applicants are as follows: areas meeting requirements under 13 CFR

301.2; Economic Development Districts; Indian tribes; consortiums of

Indian Tribes; states, cities or other political subdivisions of a

state; consortiums of political subdivisions of states; institutions of

higher education, consortiums of institutions of higher education;

public or private nonprofit organizations or associations acting in

cooperation with officials of a political subdivision of a state, for-

profit organizations, and private individuals.

A lead applicant may have one or more other eligible applicants as

co-applicants. Where appropriate, applicants should identify in advance

professional financial and/or legal consultants who will participate in

the

[[Page 23980]]

project under contract. Such contracts are subject to procurement

requirements as set forth in 15 CFR Part 14 (63 FR 47155) or 15 CFR

Part 24, as applicable.

B. Proposal Submission Procedures

Initial proposals submitted by potential applicants should include:

(1) a description of how the applicant(s) intend(s) to carry out the

scope of work; (2) a proposed budget and accompanying narrative; (3)

resumes/qualifications of key staff, and (4) a proposed time line. EDA

will not accept proposals submitted by FAX. Proposals received after

5:00 p.m. EDT in Room 7019, on June 21, 1999, at the address provided

above, will not be considered.

IV. Selection Process and Evaluation Criteria

Proposals will receive initial review by EDA to assure that they

meet all requirements of this announcement and requirements under 13

CFR Chapter III (64 FR 5347), including eligibility and relevance to

the specified project as described herein. All proposals must:

(1) Meet EDA's statutory and regulatory requirements;

(2) Propose an actual securitization; and

(3) Document a structure that ensures an arms-length transaction

between the seller and the purchaser.

EDA will carry out its selection process using the following

criteria:

(1) The quality of a proposal's response to the scope of work

proposed; and

(2) The ability of the prospective applicant to successfully carry

out the proposed activities. If an initial proposal is selected, EDA

will invite the proponent(s) to submit a full proposal and supply the

applicant(s) with an Application for Federal Assistance.

From the full proposals and applications, EDA will select the

applicant(s) it deems most qualified and cost-effective. EDA

anticipates that more full proposals and applications will be received

than will eventually be funded.

V. Additional Information and Requirements

See 64 FR 9221, Part III for additional information and

requirements (available on the internet at http://www.doc.gov/eda/html/

notice.htm, under the heading ``Economic Development Programs-

Availability of Funds'').

Dated: April 26, 1999.

Phillip A. Singerman,

Assistant Secretary for Economic Development.

[FR Doc. 99-10830 Filed 5-3-99; 8:45 am]

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