Global Technology and Innovation Fund - FAQ

Call for Proposals
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The questions and answers below were developed to provide applicants with general guidelines regarding the structure and management of the Fund.  Final terms will be negotiated with finalists prior to commitment.

1. Structure and Form of Participation
2. Economic Issues
3. Management Issues
4. U.S. Participation
5. Other
6. Information about the certification described in Section G(e)of the Questionnaire
    

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1) Structure and Form of Participation

What structure does OPIC expect the Fund to have?

OPIC seeks innovative proposals and will remain flexible in reviewing the proposed structures put forth by the respondents. OPIC has experience participating in a broad range of fund structures (e.g., master-feeder fund structures, parallel or co-investment vehicles) and will consider other innovative fund structures (e.g., consortiums, special purpose vehicles).

OPIC provides its support in the form of senior debt to a fund.

How much does OPIC invest?

OPIC typically provides no more than one-third of the capital of a fund, i.e., an amount equal to fifty percent of the equity capital raised for the fund.

How is OPIC’s participation advantageous to investors?

OPIC’s participation in a fund provides the following benefits to investors:

1. OPIC’s early commitment to a fund can serve as an anchor in attracting additional capital; and,
2. Leverage provided by senior debt can enhance up-side potential for equity investors.  OPIC senior debt is long term and repayment is structured to be compatible with anticipated liquidation of the fund’s portfolio.  The cost of OPIC senior debt is minimized by funding through loan participations that are backed by the full faith and credit of the US Government.

Do all OPIC Funds have uniform terms?

Each fund OPIC supports is different and the terms of OPIC's support are negotiated on a case-by-case basis, taking into account such factors as investor risk appetite, fund return targets, and a fund’s investment strategy.  The following questions and answers are intended to illustrate some general principles around which OPIC funds are organized, but are by no means exhaustive.

How does OPIC invest?

OPIC typically provides its support to a fund in the form of a senior, secured loan, and sells participations in these loans to U.S. eligible institutional investors in the U.S. capital markets. The certificates of participation ("COPs") in these loans are backed with OPIC's U.S. Government full faith and credit guaranty.  Proceeds from the sale of COPs to these institutional investors ("COP holders") are used to fund OPIC’s commitment.

What loan tenors are acceptable to OPIC?

OPIC can extend credit for relatively long tenors.  Loans to private equity funds are generally coterminous with the fund's life.

Will the loan be non-recourse to the Fund's LPs and sponsors?

In general, the loan is non-recourse to the fund's limited partners and sponsors.  In addition, the sponsors, the general partner or the fund itself are expected to pay organizational and start up costs (including OPIC's expenses) in connection with the fund.

What is the maximum drawdown period of OPIC financing?

OPIC generally provides a maximum drawdown period of up to 6 years, but can be extended based on strategy and investment thesis.

Under OPIC's terms are there any restrictions on the types of instruments the Fund can use for its investments?

OPIC’s objective is to support long-term, patient capital investment in new companies, expansions, restructuring capitalizations, or privatizations.  The fund can use whatever instruments it deems most suitable, such as equity and equity related investments, participating debt, and other structures that are appropriate for the local investment environment.

Should OPIC not participate in the first close of the fund, will OPIC require participation in investments already made?

While OPIC does not require participation in investments that have been made prior to OPIC’s closing in the fund, OPIC would prefer to participate in all eligible portfolio companies of the fund.

2) Economic Issues

What interest rates will be charged on the OPIC loan?

Typically an OPIC-guaranteed loan will bear Base Interest at a prevailing rate based on the rate for U.S. Treasury STRIPs with comparable terms and tenor determined separately for each disbursement.  In addition, there is a premium over U.S. Treasury STRIPs which COP holders require; this premium is based on market conditions at each disbursement. Interest (including the OPIC premium) will accrete and compound semi-annually.

Would OPIC expect to participate in the Fund's capital gain?

OPIC is paid a minimal share in cash distributions from the fund after the OPIC-guaranteed loan has been repaid and investors have recovered their full equity investment in the fund. This participation would be negotiated between OPIC and the general partner of the fund.

What are the anticipated OPIC fees and expenses to be paid by a Fund?

The Base Interest rate is paid to the COP holders.  Separately, OPIC receives the following:

1. OPIC's legal expenses to document its financing for a fund;
2. A facility fee on OPIC’s commitment;
3. A commitment fee on the undisbursed principal amount of the loan commitment; and
4. Annual Current Interest on the outstanding loan balance (including capitalized interest).

A Fund estimating to deliver 20% returns to its investors should expect an all in cost of the OPIC product to range between 9.5% and 12%.

When will repayments be required to begin?

Typically, the loan is structured as a fixed-rate obligation, with Base Interest accruing so that no repayment is required until the portfolio is in liquidation. The Current Interest is paid semi-annually following the first disbursement.

Does the OPIC guaranteed financing need to be fully repaid before any return of capital to equity investors?

OPIC can allow for equity investors to receive distributions on a pro rata basis with OPIC, under a "Waterfall" formula generally described below.

Proceeds from exited investments may be used in the following general priority in the earlier years of the fund:

1. to pay expenses of the fund;
2. to provide for reserves for future fund expenses;
3. to fund investments;
4. to make tax distributions to equity investors; and,
5. to make payments on OPIC-guaranteed loans along with applicable premiums.  After providing for the foregoing, an OPIC-supported fund may, during the early years of a fund's life (typically, the first seven years of a ten year fund), make concurrent distributions to equity and debt participants in a fund, on a pro rata basis, as long as a negotiated prescribed debt to equity ratio is maintained. During the later years of a fund's life, and to the extent that OPIC-guaranteed loans and interest have not been satisfied, distributions are generally required first to be made to meet those obligations.

Should the proscribed debt to equity ratio not be maintained, OPIC would receive all fund distributions until the ratio is met.

3) Management Issues

Does OPIC participate in investment decisions of the Fund manager?

OPIC does not participate in the commercial decision making of the fund manager. OPIC's role is as a lender to the fund and as a non-voting member of a fund’s Advisory Board.

What is the extent of OPIC's review of investment decisions? Are these based on commercial grounds, or solely on compliance with OPIC's policies?

Consent with respect to compliance with OPIC policies must be received on each fund investment. OPIC's policy review does not encompass the commercial merits of proposed investments. The scope of OPIC's policy review and the nature of its policies, which relate to environmental, health and human safety, internationally recognized worker rights, human rights, host country economic development impact, and displacement of U.S. jobs considerations, as well as certain proscribed industries (e.g., military production, tobacco), will be set forth in the OPIC loan documentation and can be provided to prospective fund managers on request.

Is there anything in which the Fund may not invest?

OPIC will not support investments that fail to respect internationally recognized workers' rights and human rights, constitute a major environmental, health or human safety hazard (e.g. generation of substantial greenhouse gas emissions, degradation of Critical Forest Areas or related Critical Natural Habitats, large dams, significant human resettlement), displace U.S. jobs, or are involved in certain proscribed industries (e.g., military production or sales, tobacco, gambling).

Will there be any investment or allocation restrictions based on stage, sector or industry or geography?

OPIC would expect the fund to build a diversified portfolio and anticipates that the fund's organizational and financial documents will contain language to encourage such diversification and to avoid imprudent concentrations.

What are the OPIC eligible countries in the Targeted Regions?

The OPIC eligible countries in the Targeted Regions are listed on OPIC’s website at www.opic.gov/doing-business/where-we-work.
Does OPIC require portfolio companies to be domiciled in OPIC eligible countries?    No, OPIC does not require a portfolio company to be domiciled in an OPIC eligible country.  However, the substantial majority of a portfolio company’s business must be generated in OPIC eligible countries.

4) U.S. Participation

Will OPIC require that the Fund and/or the fund manager be U.S.-owned?

OPIC seeks to support funds that have U.S. participation in either the ownership of the fund manager/general partner, or the equity capital of the fund. Proposals should demonstrate that the fund manager/general partner will be majority beneficially owned by U.S. Persons, or that the fund sponsor will seek to raise equity capital from U.S. Persons equivalent to 25% of OPIC’s expected commitment.

"U.S. Persons" means (a) U.S. citizens, (b) U.S. corporations, partnerships, trusts, and similar entities that are more than 50% beneficially owned by U.S. citizens, or (c) foreign entities wholly owned by U.S. citizens.

Does the Fund have to be domiciled in the U.S.?

No.  However, the fund should be domiciled in a country that OPIC is comfortable will enforce its agreements with the fund.

5) Other

How many funds will be selected from the Call?

OPIC reserves the right not to select any proposal or to select more than one.

How does OPIC define “technology and innovation” for the purpose of this Call?

Through this Call, OPIC is looking to invest in private equity funds that will invest in companies that promote access to and growth of technology in OPIC-eligible countries.  Technology is broadly defined to allow for a wide range of market based strategies, and could encompass but is not limited to sectors such as IT, healthcare, education, infrastructure, telecom, media, business and financial services, and clean-tech.  Examples of financed projects could include the following: strategies that helped to foster the development and use of new technologies such as computer, information, media and telecommunications businesses, or provision of broadband access; strategies that focus on the implementation of existing technologies to create new efficiencies; health sector strategies that focus on companies in medical, pharmaceutical, and other biotechnology areas; investment in technology and telecom infrastructure, energy efficiency and smart-grid technologies; strategies that promote the adoption of technology and new media for applications in education, and business and financial services; or technologies that might address other environmental and social problems, such as shortages of clean water.  The specific investment strategy would be determined by the fund managers.

Is the Fund expected to exclusively make investments in the Regions specified in the Call for Proposal?

OPIC will consider fund proposals that expect to make investments in OPIC-eligible countries in the regions defined in the Call for Proposals. However, OPIC will also consider fund strategies that include other regions or countries not defined in the Call for Proposals.

Are first time managers eligible for OPIC funding?

OPIC welcomes first time fund managers and new teams to apply for funding through this Call for Proposals.  However, as a part of its selection process, OPIC will consider individual track records and relevant experience.

Will we be required to submit any additional information?

After reviewing your proposal, should our due diligence proceed, finalists may be asked to:

1. Answer additional questions;
2. Complete a Sponsor Disclosure Report;
3. Visit OPIC's offices for an interview (see Due Diligence Timeline);
4. Make your staff available for additional detailed due diligence (see Due Diligence Timeline); and,
5. Make available to OPIC information regarding past and current portfolio investments including the opportunity to visit sites and financial records of selected investments.

6) Information about the certification described in Section G(e)of the Questionnaire

What is a “discouraged transaction”?

“Discouraged transaction” means any of the following activities:

1. An investment commitment of $20,000,000 or more in the energy sector in Iran, North Korea, Sudan, Syria or Cuba.
2. Any loan, or an extension of credit to the government of Iran, North Korea, Sudan, Syria or Cuba that is outstanding and has value of more than $5,000,000, including the sale of goods for which payment is not required by the purchaser within 45 days.
3. The transfer of goods included on the United States Munitions List, referred to in section 38((a)(1) of the Arms Export Control Act (22 U.S.C. 2778(a)(1)) to the government of Iran, North Korea, Sudan, Syria or Cuba within the preceding 3 years.

What is an “investment commitment in the energy sector of Iran, North Korea, Sudan, Syria or Cuba?”

Any of the following activities undertaken pursuant to a commitment, or pursuant to the exercise of rights under a commitment, that was entered into with the government of a state sponsor of terrorism or a nongovernmental entity in Iran, North Korea, Sudan, Syria or Cuba:

1. Including responsibility for the development or transportation of petroleum or natural gas resources or for the general supervision or guaranty of another person’s performance of such a contract;
2. The purchase of shares of ownership, including an equity interest, in the development of petroleum or natural gas resources described in (a).
3. The participation in royalties, earnings or profits in the development of petroleum or natural gas resources described in (a), without regard to the form of the participation.