§ 77.224. Special terms and conditions for collateral bonds.
(a) The Department will obtain and keep in custody collateral deposited by the permittee until authorized for release or replacement as provided in this subchapter.
(b) A collateral bond pledging negotiable government securities is subject to the following conditions:
(1) The Department may determine the current market value of government securities for the purpose of establishing the value of the securities for bond deposit.
(2) The current market value shall be at least equal to the amount of the required bond amount.
(3) The Department may periodically revalue the securities and may require additional amounts if the current market value is insufficient to satisfy the bond amount requirements for the facility.
(4) The operator may request and receive the interest accruing on governmental securities with the Department as the interest becomes due. The Department will not make interest payments for postforfeiture interest, accruing during appeals, and after resolution of the appeals, when the forfeiture is adjudicated, decided or settled in favor of the Commonwealth.
(c) A collateral bond pledging certificates of deposit is subject to the following conditions:
(1) The Department will require that certificates of deposit be assigned to the Department, in writing, and that the assignment be recorded upon the books of the bank issuing the certificates.
(2) The Department will not accept an individual certificate of deposit for a denomination in excess of the maximum insurable amount as determined by the Federal Deposit Insurance Corporation (FDIC) and Federal Savings and Loan Insurance Corporation (FSLIC).
(3) The Department will require the banks issuing the certificates of deposit to waive rights of setoff or liens which they have or might have against the certificates.
(4) The Department will accept only automatically renewable certificates of deposit.
(5) The Department will require the permittee to deposit sufficient amounts of certificates of deposit, to assure that the Department will be able to liquidate the certificates prior to maturity, upon forfeiture, for the amount of the bond required by this subchapter.
(6) The Department will accept only certificates of deposit from banks or banking institutions licensed or chartered to do business in this Commonwealth.
(7) The permittee will not be entitled to interest accruing after forfeiture is declared by the Department, unless the forfeiture declaration is ruled invalid by a court having jurisdiction over the Department, and the ruling is final.
(d) A collateral bond pledging a letter of credit is subject to the following conditions:
(1) The letter of credit shall be a stand-by letter of credit issued by a Federally-insured or equivalently protected bank or banking institution, chartered or authorized to do business in this Commonwealth.
(2) A letter of credit shall be irrevocable. The Department may accept a letter of credit which is irrevocable for a term of 1 year if:
(i) The letter of credit is automatically renewable for additional terms unless the bank gives at least 90 days prior written notice to the Department and the permittee of its intent to terminate the credit at the end of the current term.
(ii) The Department has the right to draw upon the credit before the end of its term and to convert it into a cash collateral bond, if the permittee fails to replace the letter of credit with other acceptable bond within 30 days of the bank’s notice to terminate the credit.
(3) The letter of credit shall name the Department as the beneficiary and shall be payable to the Department under § 77.253(a)(1) (relating to procedures).
(4) A letter of credit shall be subject to the most recent edition of the Uniform Customs and Practices for Documentary Credits, published by the International Chamber of Commerce, and the laws of the Commonwealth, including 13 Pa.C.S. § § 1101—9507 (relating to Uniform Commercial Code).
(5) The Department will not accept letters of credit from a bank that has failed to make or delayed in making payment on a defaulted letter of credit.
(e) Collateral shall be in the name of the permittee, and shall be pledged and assigned to the Department free and clear of rights or claims. The pledge or assignment shall vest in the Department a property interest in the collateral which shall remain until release under the terms of this chapter, and may not be affected by the bankruptcy, insolvency or other financial incapacity of the operator. The Department will insure that ownership rights to collateral deposited are established to make the collateral readily available upon forfeiture. The Department may require proof of ownership, and other means such as secondary agreements, as it deems necessary to meet the requirements of this chapter.
Source The provisions of this § 77.224 adopted March 16, 1990, effective March 17, 1990, 20 Pa.B. 1643; amended August 18, 2023, effective August 19, 2023, 53 Pa.B. 5159. Immediately preceding text appears at serial pages (198703) to (198705).
Cross References This section cited in 25 Pa. Code § 77.221 (relating to scope).
No part of the information on this site may be reproduced for profit or sold for profit.
This material has been drawn directly from the official Pennsylvania Code full text database. Due to the limitations of HTML or differences in display capabilities of different browsers, this version may differ slightly from the official printed version.
