Press Release
Friday, September 21, 2007
OPIC BOARD APPROVES $250 MILLION FOR LOW-INCOME HOUSING DEVELOPMENT IN MEXICO
Project will build over 15,000 low and middle-income homes, support growth of capital markets in country
WASHINGTON, D.C. – The Board of Directors of the Overseas Private Investment Corporation (OPIC) approved $250 million in financing to fund the construction of more than 15,000 low and moderate-income homes in Mexico, in a project that will also enable smaller Mexican mortgage lenders and larger developers to tap capital markets for additional financing for housing development.
The OPIC investment guaranty will enable Reforma BLN-Backed I (Reforma), a U.S.-based structured vehicle, to provide loans to finance housing construction, land development and infrastructure development. In particular, Reforma will provide funds to smaller real estate companies and mortgage lenders – called sofoles or sofomes – that have lacked access to financing that would enable them to keep up with market demand.
Reforma, backed by AAA-rated Mexican Bridge Loan Notes (BLNs), allows U.S. qualified institutional buyers to invest in Latin America's strongest asset-backed securities market with enhanced credit risk by a partial guaranty from OPIC. Deutsche Bank Securities Inc, is the sole lead arranger of Reforma BLN-Backed I.
A 2007 report by the International Monetary Fund indicated that while mortgage lending activity in Mexico had been impressive recently, housing production still lagged new household formation, and is therefore insufficient to address a 4.5 million-unit deficit.
Upon his election last year, Mexican President Felipe Calderon announced a plan to build one million new houses per year during his administration. During several visits to Mexico in 2006 and 2007, OPIC made clear its intention to support that goal, and concluded several small projects. Today’s board project has the potential to generate a much broader impact.
“This housing project, OPIC’s largest to date in Latin America, stands not only to help Mexico address its housing deficit, but to stimulate the growth of the country’s capital markets, by allowing U.S. investors to support sofoles and real estate developers for the first time,” said OPIC President and CEO Robert Mosbacher, Jr. “Adding much-needed liquidity to the Mexican housing market is an important innovation in this project, and will help to increase the overall efficiency of the industry.”
OPIC was established as an agency of the U.S. government in 1971. It helps U.S. businesses invest overseas, fosters economic development in new and emerging markets, complements the private sector in managing risks associated with foreign direct investment, and supports U.S. foreign policy. Because OPIC charges market-based fees for its products, it operates on a self-sustaining basis at no net cost to taxpayers.
OPIC’s political risk insurance and financing help U.S. businesses of all sizes invest in more than 150 emerging markets and developing nations worldwide. Over the agency’s 35-year history, OPIC has supported $177 billion worth of investments that have helped developing countries to generate over $13 billion in host-government revenues and create over 800,000 host-country jobs. OPIC projects have also generated $71 billion in U.S. exports and supported more than 271,000 American jobs.