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 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. Typically, OPIC's participation has been for ten years with the possibility of two one-year extensions.

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.  OPIC does not waive any rights it may have under tort law.  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. 

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. Over the past five years, the market-based cost of OPIC debt including the Base Interest rate and OPIC premium have ranged between 1.5% and 6% (dependent on market conditions, tenor of loan and loan amount). Interest (including the OPIC premium) will accrete and compound semi-annually.

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:

a. OPIC's legal expenses to document its financing for a fund;

b. A facility fee on OPIC’s commitment (one-tenth of one percent (0.10%) of the OPIC commitment amount)payable partially upon execution of a commitment letter.  The remainder is payable upon initial disbursement of the loan, and may be paid out of the first disbursement;

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.

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:

a) to pay expenses of the fund;

b) to provide for reserves for future fund expenses;

c) to fund investments;

d) to make tax distributions to equity investors; and,

e) 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.

3) Environment and Economic Impact

What environment and economic development factors are important to OPIC?

OPIC will evaluate the fund's Environment and Economic Development Strategy in relation to its impact on one or more of the following social and economic dimensions.  Please note that: it is not expected nor required for a fund to address all of these dimensions:

a. Specific Renewable Energy Sectors: A fund’s likelihood to provide critical renewable energy infrastructure or services in OPIC-eligible countries in, but not limited to, sub-sectors such as solar thermal, solar photovoltaic, wind power, hydro, geothermal, and biomass; and related energy and environmental sustainability sectors, including, but not limited to, energy efficiency products, systems and equipment, emissions control and treatment, wastewater treatment and waste management.

a. Carbon Abatement: A fund’s likelihood to reduce emissions of greenhouse gases and/or reduce the intensity of energy use through its investments in OPIC-eligible countries.

c. Enterprise Development: Fund’s likelihood to provide returns to stakeholders beyond the investor, including but not limited to jobs, wages, employee benefits and training, public sector taxes, supply chain linkages and support to the emerging renewable energy sectors in OPIC-eligible countries. 

How should the Fund articulate its expected environment and economic impact?

OPIC will look to each fund manager to define the fund’s expected environment and economic impact from its investments.  Fund managers may articulate their strategy for environment and economic impact by first defining the demand for environmental services and economic development in the targeted sectors and countries in which they will invest, identifying illustrative metrics or benchmarks, and then address how the fund will assist or support economic development in the targeted sectors.

How will OPIC evaluate the environment and economic impact of a Fund’s stated strategy?

OPIC will evaluate proposals based on the fund’s likelihood to achieve one or more of the environment and economic dimensions identified above. 

OPIC expects each fund to achieve its expected environment and economic impact, while ensuring the fund meets its debt obligations and the return expectations of its investors. 

4) 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, fundamental internationally recognized worker rights, human rights, 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.

Funds supported in this Call will not require any additional reviews outside of OPIC’s traditional policy requirements.  Development impact of investments will be measured as part of a standard reporting requirement, but OPIC will not apply an environmental or economic development pre-screen to individual investments.

Is there anything in which the Fund may not invest?

OPIC will not support investments that fail to respect fundamental internationally recognized workers' rights, constitute a major environmental, health or human safety hazard, displace U.S. jobs, or are involved in certain proscribed industries (e.g., military production, tobacco).

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

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.

5) 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 has the ability to raise equity capital from U.S. Persons equivalent to 25% of OPIC’s expected commitment. 

Will OPIC require that the COPs be beneficially owned by U.S. Persons?

Yes, all OPIC-guaranteed debt must be held by U.S. Persons.

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.

6) 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.

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, funds whose investment strategies require them to invest in a region or country not specified in the Call for Proposals will be evaluated on a case-by-case basis. In some cases, OPIC may be able to support a manager that uses a separate investment vehicle for investments that meet the OPIC-eligible country and region criteria as specified in the Call for Proposals, as well as other OPIC policy requirements.

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.

7) 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 (1).
3. The participation in royalties, earnings or profits in the development of petroleum or natural gas resources described in (1), without regard to the form of the participation.