Any of OPIC’s Finance Products can be used in a variety of financial structures, depending upon the needs and characteristics of the potential project/borrower.
Project Finance is often called “limited recourse project finance” because the intent is to finance a stand-alone project company that is ultimately capable of servicing the debt with limited recourse to outside sources of financial support. The project sponsors or other outside parties are expected to provide financial support for the project (including ensuring payment of debt service) until it has met certain specific tests for physical completion, operational implementation, and financial soundness. The obligations of outside parties would decrease or terminate once the project has achieved “completion.”
Due to OPIC’s substantial reliance on the project itself for payment of debt service, this financial structure is best suited for projects in which adequate cash flow may be projected with a high degree of certainty and the assets of the project make for a satisfactory collateral base. OPIC carefully analyzes all technical, operational, financial, legal/contractual and other aspects of the project to ensure that it meets the stringent requirements of this financing structure.
For projects subject to potential cash flow uncertainties or lack of an intrinsic collateral base, a Corporate Finance structure may be more attractive. In a corporate finance transaction, OPIC makes or guaranties a loan to a creditworthy corporate entity for the purpose of undertaking a project in an OPIC-eligible country. Though the viability of the project is still very important, OPIC is relying on the overall ability of the corporate entity to service the debt. If a project has a creditworthy corporate sponsor that is willing to take the debt onto its balance sheet, the process of underwriting and documenting the transaction is generally simpler and faster.