356.23 Restrictive loan covenants approved for use by lenders.§ 356.23 Restrictive loan covenants approved for use by lenders.
(a) We approve the following standard loan covenants, which may restrict the activities of the borrower without the lender's consent and which may be included in loan agreements or other documents between an owner of a Fishing Industry Vessel and an unrelated lender that is using an approved Mortgage Trustee to hold the mortgage and debt instrument for the benefit of the lender and that is not exempted under § 356.19(d) from MARAD review of its loan and mortgage covenants, so long as the lender's consent is not unreasonably withheld:
(1) Borrower cannot sell part or all of its assets;
(2) Borrower cannot merge, consolidate, reorganize, dissolve, or liquidate;
(3) Borrower cannot undertake new borrowing or contingent liabilities;
(4) Borrower cannot insure, guaranty or become otherwise liable for debt obligations of any other entity, Person, etc.;
(5) Borrower cannot Charter or lease a vessel that is collateral for the loan;
(6) Borrower cannot incur liens, except any permitted liens that may be set forth in the loan or other financing documents;
(7) Borrower must limit its investments to marketable investments guaranteed by the United States or a State, or commercial paper with the highest rating of a generally recognized rating service;
(8) Borrower cannot make structural alterations or any other major alteration to the vessel;
(9) Borrower, if in arrears in its debt obligations to the lender, cannot make dividend payments on its capital stock; and,
(10) Borrower, if in arrears in its debt obligations to the lender, cannot make excessive contributions to pension plans, make payment of employee bonuses, or make excessive contributions to stock option plans, or provide other major fringe benefits in terms of dollar amount to its employees, officers, and directors, such as loans, etc.
(b) The mortgage may not include covenants that allow the Mortgagee to operate the vessel except as provided for in § 356.25.[65 FR 44877, July 19, 2000, as amended at 68 FR 5581, Feb. 4, 2003]