C.F.R. » Title 12 » CHAPTER VI—FARM CREDIT ADMINISTRATION › SUBCHAPTER B—FARM CREDIT SYSTEM › PART 615—FUNDING AND FISCAL AFFAIRS, LOAN POLICIES AND OPERATIONS, AND FUNDING OPERATIONS › Subpart J—Retirement of Equities and Payment of Dividends

12 C.F.R. § 615.5260

Retirement of eligible borrower stock

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(a) Definitions. For the purposes of this subpart the following definitions shall apply:

(1) Eligible borrowers stock means:

(i) Stock, participation certificates or allocated equities outstanding on January 6, 1988, or purchased as a condition of obtaining a loan prior to the earlier of the date of shareholder approval of capitalization bylaws under section 4.3A of the Act or October 6, 1988; and

(ii) Any stock, participation certificates or allocated equities for which such eligible borrower stock is exchanged in connection with a merger, consolidation, or other reorganization or a transfer of territory. Eligible borrower stock does not include equities for which eligible borrower stock is required to be exchanged pursuant to the bylaws adopted under section 4.3A or equities for which eligible borrower stock is voluntarily exchanged except in connection with a merger, consolidation or other reorganization or a transfer of territory.

(2) Retirement in the ordinary course of business means:

(i) Retirement upon repayment of a loan or under a retirement or revolvement plan in effect prior to January 6, 1988, and for eligible borrower stock issued after that date, at the time the loan was made; or

(ii) Retirement pursuant to §§ 615.5280 and 615.5290.

(3) Par value means:

(i) In the case of stock, par value;

(ii) In the case of participation certificates and other equities, face or equivalent value; or

(iii) In the case of participation certificates and allocated surplus subject to retirement under a revolving cycle and retired out or order pursuant to §§ 615.5280 and 615.5290 or otherwise under the Act, par or face value discounted at a rate determined by the institution to reflect the present value of the equity as of the date of such retirement.

(b) When an institution retires eligible borrower stock in the ordinary course of business, such equities shall be retired at par, even if book value is less than par.

(c) When a Farm Credit Bank retires stock for the sole purpose of enabling an association to retire eligible borrower stock that was issued in connection with a long term real estate loan, such stock shall be retired at par even if its book value is less than par.

[53 FR 40048, Oct. 13, 1988; 54 FR 7029, Feb. 16, 1989, as amended at 62 FR 4447, Jan. 30, 1997; 63 FR 39228, July 22, 1998]
Notes of Decisions
Cited in 4 cases, 1987–1989 · leading case: Greseth v. Fed. Land Bank (In Re Greseth), 78 B.R. 936 (D. Minnesota 1987).
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Greseth v. Fed. Land Bank (In Re Greseth), 78 B.R. 936 (D. Minnesota 1987). “Similarly, 12 C.F.R. § 615.5260 provides that “[i]n case of liquidation or dissolution of a present or former borrower, the bank may, but shall not be required to, retire and cancel .”
In Re Massengill, 73 B.R. 1008 (Bankr. E.D.N.C. 1987). “” 12 C.F.R. § 615.5260 (b) (emphasis added).”
In Re Cansler, 99 B.R. 758 (W.D. Ky. 1989). “2 Further, 12 C.F.R. § 615.5260 (b) provides that “the bank may, but shall not be required to, retire and cancel all or part of any stock .”
In Re Ivy, 86 B.R. 623 (Bankr. W.D. Mo. 1988). “12 C.F.R. § 615.5260 (b). CHAPTER 11 Courts have not allowed Chapter 11 debtors to reduce their obligation to the FLB by *624 surrendering their stock because FLB and PCA are given the sole discretion under federal law, to cancel stock and apply it to customer loans.”
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