ReConnect Financial Requirements 101 · 13 Financial Feasibility and Sustainability: •Sufficient revenue to cover expenses •Sufficient cash flow to cover all debt service obligations

https://reconnect.usda.gov 1

USDA RUS ReConnect Program

ReConnect Financial Requirements 101

https://reconnect.usda.gov

Announcements

• Funding window has been extended to allow Applicants to access technical assistance provided by USDA

• Final funding windows were announced in a notice in the Federal Register on February 25, 2019

• Applications for the 100% Grant funding category will be accepted through May 31, 2019

• Applications for the 50/50 Loan/Grant Combination funding category will be accepted through June 21, 2019

• Applications for the 100% Loan funding category will be accepted through July 12, 2019

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Enable

technologies

critical to rural

communities.

Fuel long-term

economic

development in

rural America.

Bring high-speed

broadband to

rural areas that

lack access.

Support improved

access to education

and healthcare in

rural communities.


https://reconnect.usda.govhttps://reconnect.usda.gov 5

100 Percent Loan

Applications will be accepted

on a rolling basis through

July 12, 2019.

July 12, 2019

50/50 Loan/Grant Combo

Applications will be

accepted through

June 21, 2019.

June 21, 2019

100 Percent Grant

Applications will be

accepted through

May 31, 2019.

May 31, 2019

Get Started

Application deadlines

released in notice in the

Federal Register.

Feb. 25, 2019

A New Way Forward

ReConnect Program and

funding opportunity announced

by Sec. Perdue.

Dec. 13, 2018

Officially Released

ReConnect Program Funding

Opportunity Announcement

released in the Federal Register.

Dec. 14, 2018

Check reconnect.usda.gov

The date that applications

will start being accepted will

be announced.

March 2019



Program DesignKey Financial Components, ReConnect Products, and Eligible Costs

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• The construction or improvement of facilities, including buildings and land, required to provide broadband service

• Pre-application expenses (not to exceed 5% of the total award) – Costs must be incurred after the publication date of the FOA and be documented

• Terrestrial-based facilities for satellite broadband service

• Costs must be reasonable, allocable, and necessary

• Applications that propose to use any portion of the award or matching funds for any ineligible cost may be rejected

Eligible Project Costs

For 100% loans only

The acquisition of an existing system that does not

currently provide sufficient access to broadband

(limited to 40% of the total loan amount).


• Applicant’s operating costs

• Costs incurred prior to the date on which the application was submitted, and with respect to eligible pre-application expenses, those costs incurred prior to the date of the publication date of the FOA

• Costs associated with an acquisition or merger of:• An affiliate;

• Any facilities or equipment of an affiliate; and

• A system previously funded by RUS

• Vehicles not used for construction

• Costs associated with the purchase of spectrum

• Costs associated with the operating leases of broadband facilities and IRUs

• Mobile service facilities

• A system that provides sufficient access to broadband

• To refinance outstanding debt

Ineligible Project Costs


Key Financial Components of the ReConnectApplication

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Financial Requirements from the FOA:

• A financial pro forma (2015-2024), four years of historical data, current (bridge year) financials, and five years of projections

• Capital Investment Workbook (CIW) & Schedule

• The Applicant will also need to provide unqualified, audited financial statements for two full years preceding the date the application is submitted

Applicants Will Need to Submit…


Financial Feasibility and Sustainability:

• Sufficient revenue to cover expenses

• Sufficient cash flow to cover all debt service obligations as they come due

• Positive ending cash balance for each year in the forecast period

• By the end of the five year forecast period, Applicants must meet two of the following three conditions:

• Debt service coverage ratio must be greater than or equal to 1.2x

• Times interest earned ratio must be greater than or equal to 1.2x

• Minimum current ratio must be greater than or equal to 1.2x

• Positive cash flow from operations at the end of the forecast period

Applicants Must Demonstrate…


Amortization Period• The amortization period is equal to composite

economic life of the facilities plus three years

Interest Rate• The interest rate on the RUS loan component of the

50/50 Loan-Grant Combo will be set equal to the yield on a US Treasury Note with a comparable maturity – The applicable interest rate is determined at the time of each draw

Awardee Operations• The Agency reserves the right to withhold funds until

a management analysis profile (MAP) is completed after award

Three Year Deferral• The principal and interest will be deferred for the first

three years of the loan

Applicants Should Consider…


USDA Required Security Features

• Loans must be secured by all assets, including all revenues of the awardee

• Grants must be secured by all grant assets

• USDA may share its first lien position with one or more lenders on a pari passu basis

• Applicants must submit a certification that prior lenders or lienholders on any awardee asset has agreed to sign the standard RUS intercreditor agreement or co-mortgage

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Detailed Overview of Required Application MaterialsFinancial Pro Forma; a Capital Investment Workbook & Schedule; and Unqualified, Audited Financial Statements

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Required Application Materials: A Financial Pro Forma (five year projection from first advancement)

• A financial pro forma (2015-2024) to provide four years of historical data, including current (bridge year) financials, and five years of projections:

• The bridge year shall be the year in which the application is submitted, and used as a buffer between the historical financial information and the forecast period

• The financial pro forma must include:• Income statement

• Balance sheet

• Statement of cash flows

• USDA will review the financial pro forma for the following:• Existing/expected debt burden over the forecast period

• The reasonableness of assumptions in their review of the financial pro forma

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Required Application Materials: A Capital Investment Workbook and Schedule• A Capital Investment Workbook (CIW) and Schedule (CIS) to

provide more detail on the assumptions that went into building the pro forma

• The Workbook and Schedule require Applicants to detail cost estimates and the timing of construction/project expenses over the buildout period

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Required Application Materials: Unqualified, Audited Financial Statements• Unqualified, audited financial statements for two full years

preceding the date of the application • For governmental entities, the unqualified, audited financial

statements must be accompanied with certifications as to unrestricted cash that may be available on a yearly basis

• For start up operations formed from partnerships of existing utility providers, audited financial statements for the previous two years are required for each partner – In addition, the partners must guarantee any loan component of the requested funding

• If applicants have parents or subsidiaries, it would be beneficial if the following was provided for USDA’s consideration:

• Parent company information (as applicable) – Historical financial statements, organizational chart, debt instruments

• Subsidiary information (as applicable) – Historical financial statements, organizational chart, debt instruments

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Supplemental Application Materials:Financial Information

• Applicant’s audited financial statements for the previous two years

• Evidence of Equity Infusion

• Federal/State Grant documents

• Funded debt instruments (RD, Other, Other LT Debt)

• Letters of Commitments and Term Sheets

• Obligations under capital leases, lease agreements

• Statements of affordability

• Alternative households supporting data

• Cost consultant certification

• UCC-1 Form

• Lines of Credit

• Competitive Analysis

• Bank account statements

• Other supporting documentation

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Income Statement

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Balance Sheet

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Statement of Cash Flows

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Post-Award Considerations

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Post-Award Financial Reporting Considerations

• Awardees must adopt a system of accounts for maintaining financial records acceptable to the Agency, as described in 7 CFR part 1770, subpart B

• Awardees must submit annual audited financial statements prepared by a CPA along with a report on compliance and on internal control over financial reporting, and a management letter in accordance with the requirements of 7 CFR part 1773

• USDA may conduct a Management Analysis Profile (MAP) that includes sending a team out to the Applicant’s’ offices

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Available ResourcesWhat resources are available and how you can get help during the application process

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• Workshops• Multiple Workshops to be held across the country

• Schedule is on the ReConnect website under “Events”

• RD experts and detailed application information

• Webinars• Multiple Webinars to be held

• Schedule is on the ReConnect website under “Events”• Materials are on the ReConnect website under “Forms and

Resources”

• RD experts and detailed application information

• Resources• ReConnect website https://reconnect.usda.gov• Electronic application intake system• Program FAQs

• OneRD Coordination• Resources across RD • Help Desk • Technical Assistance and support to Applicants

Available Resources

https://reconnect.usda.gov/


ReConnect Support Desk


For help or questions please contact us at

Documents

ReConnect Financial Requirements 101 · 13 Financial Feasibility and Sustainability: •Sufficient revenue to cover expenses •Sufficient cash flow to cover all debt service obligations