FCC Provides Guidance on the Eligibility of Non-US Banks to Issue Letters of Credit

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The Federal Communications Commission’s Wireline Competition Bureau, Rural Broadband Auctions Task Force and the Office of Economics and Analytics (the Bureaus), have provided guidance for applicants/recipients of universal service support allocated through a competitive bidding mechanism (e.g., RDOF Auction 904) on the eligibility of non-US banks to issue required letters of credit. Where a foreign bank has a branch office in New York City, and agrees to accept a letter of credit draw certificate from the Universal Service Administrative Company (USAC) via overnight courier, such bank will be considered qualified to issue letters of credit if it meets the FCC’s other eligibility requirements. Those requirements include: (1) being among the 100 largest non-U.S. banks in the world; (2) having a long-term unsecured credit rating issued by a widely-recognized credit rating agency (equivalent to BBB- or better rating by Standard & Poor’s); and (3) issuing the letter of credit payable in U.S. dollars. The Bureaus have recognized that many non-US banks have branches in New York City rather than Washington, D.C., and believe that with the ease of travel between the cities, and USAC’s ability to submit a draw certificate via overnight courier, USAC and the Bureaus will be able to promptly draw on the letter of credit in the event of default.

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