Overseas Private Investment Corporation Investment Funds Call for Proposals

Latin America Capital Markets Fund

Call for Proposals

FAQ

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 prior to commitment.

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, drop down, parallel, etc.). OPIC provides its support in the form of senior debt to a fund.
What form is OPIC’s participation in the fund?	OPIC provides its support in the form of senior debt to a fund. OPIC’s instrument has been structured to meet the operational needs of the typical illiquid alternative asset fund, utilizing a mezzanine pricing structure (coupon plus profit participation) and allowing a substantial portion of the coupon to accrue and accrete and the principal balance to be non-amortizing.
2) Terms of OPIC's Investment in the Fund
Do all OPIC Funds’ have uniform terms?	Each fund OPIC supports is different and the terms of OPIC's investment are negotiated on a case-by-case basis. The following questions and answers illustrate the general principles around which OPIC funds are organized.
How does OPIC fund its investment?	OPIC anticipates that its investment in the Fund will be in the form of a loan. In the past, OPIC has sold participations in its loans to institutional investors in the U.S. capital markets. These certificates of participations ("COPs") are then backed with OPIC's U.S. Government full faith and credit guaranty. OPIC funds its loan with the proceeds from the sale of COPs to institutional investors ("COP holders"). Alternatively, OPIC can guarantee fund capital from U.S. Persons (as defined below). Through a unit fund structure, OPIC could guarantee up to one-third of a fund’s capital, with the guaranteed capital becoming debt in the fund capital structure and receiving a Base Interest (as defined below) return.
What loan tenors are acceptable to OPIC?	OPIC can extend credit for relatively long tenors. Loans to private equity funds are coterminous with the fund's life. Typically, therefore, 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 LPs and sponsors, except that the sponsors must indemnify and defend OPIC against losses in connection with the proposed fund prior to first close of the fund, and OPIC does not waive any rights it may have under tort law. In addition, organizational and start up costs (including OPIC's expenses) in connection with the fund are expected to be paid out by the sponsors or the fund.
3) Economic Issues
What are the anticipated OPIC fees and expenses to be paid by a fund?	Separate from Base Interest paid to holders of COPs, OPIC receives: a. A facility fee on OPIC’s commitment, payable partially upon execution of a commitment letter/term sheet and partially upon initial disbursement. b. A commitment fee on the undisbursed principal amount of the debt commitment, payable semiannually. c. The annual Current Interest, based on the outstanding loan balance (including capitalized interest); payable semiannually. d. Administrative fees may be charged, depending on particular fund needs (technology services, etc.). e. OPIC's legal expenses to document its loan to a fund.
What interest rates will be charged on the OPIC loan?	OPIC anticipates that the loan will bear base interest at a market rate based on the rate for U.S. Treasury securities with a comparable term, determined separately for each disbursement. In addition, there is a premium over U.S. Treasury securities, which COP holders require based on market demand at each disbursement. The base rate (a risk free rate) plus this premium represent OPIC's cost of funds for the COPs with respect to the loan ("Base Interest"). In addition, OPIC charges a current interest spread (as discussed below) to reflect the risk to OPIC associated with the loan (the "Current Interest").
When will repayments be required to begin?	Typically, the loan is structured as a fixed rate obligation. Base Base Interest accrues and accretes so that no repayment is required until the portfolio is in liquidation. The Current Interest is due semi-annually following the first disbursement. OPIC can offer adjustable rate financing where Base Interest is non-accruing and paid on a current basis with Current Interest.
Does OPIC 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: a) to pay expenses of a 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 a period representing a majority of a fund's life, 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.
Would OPIC expect to participate in the fund's capital gain?	OPIC expects a minimal share (referred to as “Deferred Interest”) in cash distributions from the fund after the OPIC-guaranteed loan has been repaid and investors have recovered their full investment in the fund. This would be negotiated between OPIC and the fund sponsors.
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.
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?	OPIC consent in respect of compliance with OPIC policies must be received on all fund investments. OPIC's consent 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.
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, generate substantial greenhouse gas emissions, 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?	The Fund will be required to build a diversified portfolio and OPIC anticipates that the fund's organic documents will contain restrictions 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 significant U.S. participation in either the ownership of the fund manager/general partner, OR the equity capital of the fund. The extent to which a proposal demonstrates that the fund manager/general partner will be majority beneficially owned by U.S. Persons, and/or that the fund sponsor has the demonstrated ability to raise equity capital from U.S. Persons equivalent to 25% of OPIC’s expected commitment, may be used as a factor in OPIC's selection. "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, and c) foreign entities wholly owned by U.S. citizens.
Will OPIC require that the beneficiary of an OPIC guaranty of debt with respect to the Fund be beneficially owned by U.S. Persons?	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.
Will we be required to submit any additional information?	After reviewing your proposal, should our due diligence proceed, you may be asked to: complete and return one or more additional information requests; complete a Sponsor Disclosure Report; visit OPIC's offices for an interview; make your staff available for additional detailed due diligence; and make available to OPIC information regarding past and current portfolio investments including the opportunity to visit sites and financial records of selected investments.