Requirements of the Subordinated Debt Note.

CFR · 2024-01-01 · US · Title 12

(a) (1) Be in the form of a written, unconditional promise to pay on a specified date a sum certain in money in return for adequate consideration in money; (2) Have, at the time of issuance, a fixed stated maturity of at least five years. The stated maturity of the Subordinated Debt Note may not reset and may not contain an option to extend the maturity. A credit union seeking to issue Subordinated Debt Notes with maturities longer than 20 years from the date of issuance must provide the information required in § 702.408(b)(14) as part of its application for preapproval to issue Subordinated Debt; (3) Be subordinate to all other claims in liquidation under § 709.5(b) of this chapter, and have the same payout priority as all other outstanding Subordinated Debt and Grandfathered Secondary Capital; (4) Be properly characterized as debt in accordance with U.S. GAAP; (5) Be unsecured, including, without limitation, prohibiting the establishment of any legally enforceable claim against funds earmarked for payment of the Subordinated Debt through: (i) A compensating balance or any other funds or assets subject to a legal right of offset, as defined by applicable state law; or (ii) A sinking fund, such as a fund formed by periodically setting aside money for the gradual repayment of the Subordinated Debt; (6) Be applied by the Issuing Credit Union at the end of each of its fiscal years (or more frequently as determined by the Issuing Credit Union) in which the Subordinated Debt remai

official document · source cfr-2024 · id 12:§ 702.404