Section 1792.2 Of Article 6. Reporting And Reserve Requirements From California Health And Safety Code >> Division 2. >> Chapter 10. >> Article 6.
1792.2
. (a) A provider shall satisfy its liquid reserve obligation
with qualifying assets. Qualifying assets are:
(1) Cash.
(2) Cash equivalents as defined in paragraph (4) of subdivision
(c) of Section 1771.
(3) Investment securities, as defined in paragraph (2) of
subdivision (i) of Section 1771.
(4) Equity securities, including mutual funds, as defined in
paragraph (7) of subdivision (e) of Section 1771.
(5) Lines of credit and letters of credit that meet the
requirements of this paragraph. The line of credit or letter of
credit shall be issued by a state or federally chartered financial
institution approved by the department or whose long-term debt is
rated in the top three long-term debt rating categories by either
Moody's Investors Service, Standard and Poor's Corporation, or a
recognized securities rating agency acceptable to the department. The
line of credit or letter of credit shall obligate the financial
institution to furnish credit to the provider.
(A) The terms of the line of credit or letter of credit shall at a
minimum provide both of the following:
(i) The department's approval shall be obtained by the provider
and communicated in writing to the financial institution before any
modification.
(ii) The financial institution shall fund the line of credit or
letter of credit and pay the proceeds to the provider no later than
four business days following written instructions from the department
that, in the sole judgment of the department, funding of the
provider's minimum liquid reserve is required.
(B) The provider shall provide written notice to the department at
least 14 days before the expiration of the line of credit or letter
of credit if the term has not been extended or renewed by that time.
The notice shall describe the qualifying assets the provider will use
to satisfy the liquid reserve requirement when the line of credit or
letter of credit expires.
(C) A provider may satisfy all or a portion of its liquid reserve
requirement with the available and unused portion of a qualifying
line of credit or letter of credit.
(6) For purposes of satisfying all or a portion of a provider's
debt service reserve requirement described in Section 1792.3,
restricted assets that are segregated or held in a separate account
or escrow as a debt service reserve under the terms of the provider's
long-term debt instruments are qualifying assets, subject to all of
the following conditions:
(A) The assets are restricted by the debt instrument so that they
may be used only to pay principal, interest, and credit enhancement
premiums.
(B) The provider furnishes to the department a copy of the
agreement under which the restricted assets are held and certifies
that it is a correct and complete copy. The provider, escrow holder,
or other entity holding the assets must agree to provide to the
department any information the department may request concerning the
debt service reserve it holds.
(C) The market value, or guaranteed value, if applicable, of the
restricted assets, up to the amount the provider must hold as a debt
reserve under Section 1792.3, will be included as part of the
provider's liquid reserve.
(D) The restricted assets described in this paragraph will not
reduce or count towards the amount the provider must hold in its
liquid reserve for operating expenses.
(7) For purposes of satisfying all or a portion of a provider's
operating expense reserve requirement described in Section 1792.4,
restricted assets that are segregated or held in a separate account
or escrow as a reserve for operating expenses, are qualifying assets
subject to all of the following conditions:
(A) The governing instrument restricts the assets so that they may
be used only to pay operating costs when operating funds are
insufficient.
(B) The provider furnishes to the department a copy of the
agreement under which the assets are held, certified by the provider
to be a correct and complete copy. The provider, escrow holder, or
other entity holding the assets shall agree to provide to the
department any information the department may request concerning the
account.
(C) The market value, or the guaranteed value, if applicable, of
the restricted assets, up to the amount the provider is required to
hold as an operating expense reserve under Section 1792.4, will be
included as part of the provider's liquid reserve.
(D) The restricted assets described in this paragraph shall not
reduce or count towards the amount the provider is required to hold
in its liquid reserve for long-term debt.
(b) Except as otherwise provided in this subdivision, the assets
held by the provider as its liquid reserve may not be subject to any
liens, charges, judgments, garnishments, or creditors' claims and may
not be hypothecated, pledged as collateral, or otherwise encumbered
in any manner. A provider may encumber assets held in its liquid
reserve as part of a general security pledge of assets or similar
collateralization that is part of the provider's long-term capital
debt covenants and is included in the provider's long-term debt
indenture or similar instrument.