slide1 n.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
The Overseas Private Investment Corporation – An Overview PowerPoint Presentation
Download Presentation
The Overseas Private Investment Corporation – An Overview

Loading in 2 Seconds...

play fullscreen
1 / 39

The Overseas Private Investment Corporation – An Overview - PowerPoint PPT Presentation


  • 137 Views
  • Uploaded on

The Overseas Private Investment Corporation – An Overview. Forrest Metz Investment Research Analyst. National Association of Realtors Legislative and Research Workshop May 14, 2003 (Washington, D.C.). The Overseas Private Investment Corporation – An Overview. What is OPIC?

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'The Overseas Private Investment Corporation – An Overview' - tovah


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
slide1

The Overseas Private Investment Corporation – An Overview

Forrest Metz

Investment Research Analyst

National Association of Realtors Legislative and Research Workshop

May 14, 2003 (Washington, D.C.)

the overseas private investment corporation an overview
The Overseas Private Investment Corporation – An Overview
  • What is OPIC?

Why Do Businesses Use OPIC?

OPIC and Housing

New Small Business Center

2

what is opic
What Is OPIC?

Self-sustaining government agency that enables U.S. businesses to succeed in emerging markets

  • Promotes sustainable development overseas and creates U.S. jobs
  • Supports foreign policy objectives of President Bush’s Administration
  • Operates at no net cost to the taxpayer

Supports private sector growth in developing countries

  • Provides long term financing for U.S. businesses in emerging markets
  • Most experienced provider of political risk insurance in the world
  • Brings equity capital and to developing countries by supporting private equity investment funds

3

opic s mission
OPIC’s Mission

To mobilize and facilitate the participation of United States private capital and skills in the economic and social development of less developed countries and areas, and countries in transition from non-market to market economies, thereby complementing the development assistance objectives of the United States.

4

slide7

The Overseas Private Investment Corporation – An Overview

What is OPIC?

  • Why Do Businesses Use OPIC?

OPIC and Housing

New Small Business Center

7

why do businesses use opic

Want to build their business

and need finance for

a new project, joint venture,

expansion or modernization

Want to protect their

investment

against the political risks of

doing business in developing

countries

Want the backing of the

U.S. Government

behind their foreign investment

Want to partner

with experts

who have supported successful

businesses in almost

every sector in over

140 developing countries

Why Do Businesses Use OPIC?

OPIC Finance

OPIC Political Risk Insurance

OPIC Investment Funds

8

opic finance benefits
OPIC Finance - Benefits

Access to scarce

capital

  • Active in countries that do not attract traditional sources of funding
  • OPIC loans encourage cooperation among investors, partners and other lenders
  • Longer tenor, market rates and significant capacity
    • Tenor 3-15 years
    • Rates based on cost of funds plus risk spread
    • $250 million loan capacity

Unique

terms and

conditions

Flexible

programs

  • Project and corporate finance models
  • Franchise program
  • New Small Business Center

Promote

corporate

citizenship

  • Screening criteria ensures that your project upholds environmental, worker rights, human rights and anti-corruption guidelines

10

opic finance eligibility and terms
OPIC Finance – Eligibility and Terms

Terms

Loan term*

  • Amortization of up to 15 years

Amount of OPIC participation

  • $100k to $250 million per project
  • Up to 50% of total project costs for new projects
  • Up to 75% of total project costs for expansions

Leverage*

  • 60% debt to 40% equity

Pricing

  • Market rates of interest (+fees)

Limited recourse financing

  • Project completion support

Eligibility

  • Commercially viable business plan and successful track record
  • At least 25% U.S. equity ownership
  • No adverse impact on U.S. jobs
  • Projects meet environmental, labor and human rights standards, anti-corruption guidelines
  • OPIC eligible country
  • Limited government participation (<50%)

* Terms and leverage vary

11

opic finance process
OPIC Finance Process

Profits!

Disbursement

& Monitoring

Credit &

Policy

Approval

Due

Diligence

Screening

Application

Disbursement

Pre-Screening

Screening

12

direct loan example construction project
Direct Loan Example – Construction Project

Cash, land, and local support

Local Partner

75%

Project Company

Cash, technology, management & financing

U.S. Partner

25%

OPIC loan

60-70% tpc

13

key issues in construction finance
Key Issues in Construction Finance

Purpose – for rent or for sale?

Collateral – land, completion guaranty, pledge of shares in project company

“Off-take” arrangement and marketing plan

Target low and lower-middle income clients

Composition of equity – what does the U.S. partner have at risk?

Capacity to buy – how will clients pay?

Experience of project team

14

construction finance project timeline
Construction Finance Project Timeline

Pre-Development and PreSales

Phase Two

Houses

Phase Three

Houses

Initial Infrastructure Phase One Houses

Sales Revenue

OPIC LOAN DISBURSEMENTS

  • OPIC Finances 60 – 70% of project costs, for 3 years or more
  • Infrastructure cost generally 25% of total
  • Draw funds over 18 – 36 months – interest only payments

15

minimizing the risks
Minimizing the Risks

OPIC Political Risk Insurance

16

opic insurance benefits
OPIC Insurance - Benefits

Access to scarce

capital

Protects your investment

  • Replace losses resulting from terrorism or war
  • Protect your income and operating expenses
  • Provides predictability through long-term fixed rates

Eliminates risk of unfair interference

Prevents foreign governments from violating agreements or taking over your business

Guarantees your ability to repatriate dividends, profits and capital

Facilitates access to credit

OPIC support is signal of security to lenders

Flexible programs for specific business needs (ex. contractors and exporters)

Avoid obstacles of resolving investor disputes through use of U.S. Government influence

Ensures that contract dispute resolution procedures and payments are honored

Strengthens your local presence

Promote

corporate

citizenship

17

opic insurance eligibility
OPIC Insurance – Eligibility

U.S. citizens

Corporations, partnerships or other associations created under laws of the U.S., over 50% U.S. owned

OPIC Political Risk Insurance

Foreign corporations at least 95% owned by U.S. citizens, corporations, or partnerships.

Other foreign entities 100% U.S. owned

18

opic insurance terms and coverage
OPIC Insurance –Terms and Coverage

Coverage

Up to 90% coverage

Inconvertibility: earnings, return of capital, principal and interest payments, technical assistance fees, and similar remittances on insured investments

Expropriation

  • equity: book value of investment at time of expropriation
  • loans :based on outstanding principal and accrued interest

Political violence: replacement cost of assets and income (up to 1yr) of destroyed assets

Terms

  • Policy terms up to 20 years. Premium rates locked in.
  • May be canceled by insured, but not by OPIC
  • Typical amount is up to $250 million per project. 10% self-insurance requirement (except for third-party lenders or lessors)

19

opic insurance construction project example
OPIC Insurance – Construction Project Example

Sources of Funding

Equity (cash, equipment, land) 3,500,000

Bank Loan6,500,000

Total Project Cost 10,000,000

Equity coverage

Debt coverage for loan payments

OPIC Insurance protects assets on the ground as well as future profits.

20

maximizing partnerships
Maximizing Partnerships

OPIC Investment Funds

21

bridging the equity gap opic investment funds
Bridging the Equity Gap – OPIC Investment Funds

Overview

  • OPIC supports 26 private equity funds to address lack of equity investment in emerging markets
  • Funds target various regions and sectors, and invest in new, expanding or privatizing companies
  • Funds capitalized by OPIC guaranteed debt and private equity

Benefits

  • Provides local enterprises in emerging markets with access to risk capital, management guidance, and financial expertise
  • Serves as engine of growth in regions most investors consider reluctant to approach
  • Improves local business climate by supporting adoption of international reporting standards, transparency and environmental and workers rights standards

22

how opic can partner with investors
How OPIC can Partner with Investors

Financing and insuring US - foreign joint ventures, and/or U.S. parent and banks that support them.

OPIC

Insurance

OPIC

Investment Funds

U.S.

Banks

Foreign

Banks

U.S. - Foreign

Joint Venture

OPIC

Finance

U.S. Parent

Company

23

opic product overview
OPIC Product Overview

OPIC

Political Risk Insurance

OPIC

Investment Funds

OPIC

Finance

Providing local firms with access to capital, management guidance, and financial expertise

Improving business climate by support of international reporting standards, and environmental and workers rights standards

Multiplying your returns in international markets

Encouraging cooperation among you and your suppliers and other lenders

Promoting good corporate citizenship

Protecting your investment

Defending your right to return profits to U.S.

Facilitating access to credit

Strengthening your local presence

Providing predictability through fixed rates

24

the overseas private investment corporation an overview1
The Overseas Private Investment Corporation – An Overview

What is OPIC?

Why Do Businesses Use OPIC?

  • OPIC and Housing

New Small Business Center

25

housing an opic strategic sector
Housing – An OPIC Strategic Sector
  • Highly developmental sector – social and economic
  • Diverse experience and deep capital base in U.S. have export potential (yet to be fully exploited)
  • Great need for housing construction and finance around the world
  • Opportunities for excellent returns on investment

26

opic direct loan for mortgages
OPIC Direct Loan for Mortgages

Local Private Bank

Takes First Loss Position

(manages portfolio)

Special Purpose

Company

U.S./Local Joint Venture

OPIC Long Term Loan

(mortgages as collateral)

Supporting Infrastructure:

  • Trustee
  • Collateral Agent
  • Paying Bank
  • Credit Administrator
  • Possible devaluation reserve

28

issues to consider with mortgage programs
Issues to Consider with Mortgage Programs

OPIC loan is in dollars – can create significant currency risk

Needs adequate legal framework for mortgage lending and collateral enforcement

Strong bank experience with underwriting and servicing mortgages is necessary

Cash is the only equity that works

Will incur significant legal costs

29

opic capital markets programs
OPIC Capital Markets Programs
  • Political risk insurance to exceed sovereign ceiling for rating
  • Financial guarantee to improve credit rating
    • OPIC can support an issue targeted to local investors so long as 51% is sold to U.S. investor
  • Back-up sovereign guarantee

30

mortgage bond program
Mortgage Bond Program

Allows local currency lending with proper hedges at the SPV level

Mobilizes U.S. long term capital and in the long run, local pension fund capital

Credit enhancement for mortgage bonds not available for non-investment grade countries

New sovereign coverage could support housing agency issues

31

mortgage bond model
Mortgage Bond Model

BOND

HOLDERS

BOND PROCEEDS

SEMI ANNUAL BOND PAYMENTS

OPIC GUARANTY

(US GOVERNMENT)

SECOND LOSS

EXPOSURE

SPV

OFFSHORE TRUST

BOND ISSUER

BOND PROCEEDS FROM

SALE OF MORTGAGES

SALE OF MORTGAGES

(Monthly Mortgage Payments)

LOCAL BANK

ASSUMES FIRST

LOSS EXPOSURE

TO SPV

MORTGAGE LOANS

LOW AND

MIDDLE INCOME

HOMEOWNERS

MONTHLY MORTGAGE PAYMENTS

32

other applicable approaches w housing
Other Applicable Approaches w/ Housing

On-lending facilities

Direct loans to SPV for long term mortgage funds or warehousing of mortgages pending sale

Construction finance

Working capital for service or insurance entities (also back-up guarantees, reinsurance)

33

key issues to remember w housing
Key Issues to Remember w/ Housing

Currency risk – OPIC is dollar lender

Fixed rate, medium/long term financing

Must have U.S. partners “at risk”

Bi-lateral agreements and honoring of international arbitration

Developmental effects and policy concerns

The timing is good – housing is high priority

34

the overseas private investment corporation an overview2
The Overseas Private Investment Corporation – An Overview

What is OPIC?

Why Do Businesses Use OPIC?

OPIC and Housing

  • New Small Business Center

35

opic small business center highlights

Greater Flexibility

  • Finance and Insurance officers working with small business transactions and requirements

Increased Small Business Deal Flow

  • Goal by end of FY-2004: 100% increase in transactions for both Insurance and Finance products
OPIC Small Business Center – Highlights

Reduced Response Time

  • Goal of 60 days from complete application to loan agreement

36

opic small business center eligibility
OPIC Small Business Center – Eligibility

Eligibility

  • Commercially viable business plan and successful track record
  • U.S. business sponsor with less than $35 million in annual consolidated revenues or $27 million in personal net worth
  • Loan amounts ranging in size from $100k up to $10m
  • Insurance coverage up to $15m – no minimum investment size
  • Projects adhere to OPIC investment policies

37

opic small business center terms
OPIC Small Business Center – Terms

Insurance

Tenor: From 3 to 20 years

Amount of OPIC participation

  • Up to $15 million of coverage per project

Pricing

  • Fixed rates-based on nature of risk
  • ex. Manufacturing Services

(Annual Base Rates per $100 of Active/Current Coverage)

Inconvertibility $0.25 - $0.45

Expropriation $0.50 - $0.70

Political Violence

Business Income $0.30 - $0.50

Assets $0.40 - $0.60

Finance

Tenor: From 3 to 15 years

Amount of OPIC participation

  • Up to $10 million per project

Leverage

  • Up to 65% debt (35% equity)

Security

  • Minimum - pledge of shares in the project

Pricing

  • Capped at 7% over cost of funds (lower with collateral availability)
  • Upfront Facility Fee (<2%) and Annual Maintenance Fee (<1%)

38

slide39

For more information, finance applications and contact information, visit our website:

http://www.OPIC.gov

To discuss your project, please contact OPIC’s Investment Development and Economic Growth Department at (202) 336-8688 or

Debbie Erb – Director of Housing Programs

(202 336-8472 dlerb@opic.gov