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OPIC (Overseas Private Investment Corporation) |
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OPIC (Overseas Private Investment Corporation) |
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World Zones
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Mission
OPIC accomplishes this mission by assisting U.S. investors through four principal activities designed to promote overseas investment and reduce the associated risks:
Private sector investment overseas contributes substantially to both the national and foreign policy interests of U.S. citizens. It strengthens and expands the U.S. economy by improving U.S. competitiveness in the international marketplace. It also helps less developed nations expand their economies and become valuable markets for U.S. goods and services, thereby increasing U.S. exports and creating U.S. jobs. As part of its overall mission, OPIC advocates on behalf of U.S. business clients that have made long-term investments in emerging markets and developing nations. OPIC also works with host country governments to help create economic climates that attract U.S. investment, facilitating the entry of hundreds of U.S. businesses into new markets abroad. OPIC sponsors and participates in numerous seminars and conferences throughout the U.S. and overseas to increase awareness among U.S. companies, especially small and medium-sized firms, of real opportunities for business expansion through overseas investment, as well as the OPIC services available to assist them. To enhance its outreach, OPIC often works closely with other federal government agencies, state and local governments, private organizations and multilateral institutions. The Overseas Private Investment Corporation’s political risk insurance and loans help U.S. businesses of all sizes invest and compete in more than 140 developing nations and emerging markets and worldwide. OPIC is a self-sustaining agency. By charging user-fees, OPIC operates at no net cost to U.S. taxpayers. OPIC has earned a profit in each year of operations — $185 million in 2000 — and its reserves currently stand at more than $4 billion. Over the agency’s 29-year history, OPIC has supported $138 billion worth of investments that will generate $63.6 billion in U.S. exports and create nearly 250,000 American jobs. OPIC projects have also helped developing countries to generate over $10 billion in host-government revenues and create nearly 668,000 host-country jobs. All of OPIC’s guaranty and insurance obligations are backed by the full faith and credit of the United States of America. Back
What
is the Overseas Private Investment Corporation? How
much support can OPIC offer any one project?
Financing Introduction OPIC can provide financing on a project-finance or a corporate-finance basis. Rather than relying on sovereign or sponsor guaranties, project finance looks for repayment from the cash flows generated by projects. Therefore, OPIC carefully analyzes the economic, technical, marketing, and financial soundness of each project. There must be an adequate cash flow to pay all operational costs, service all debt, and provide the owners or sponsors with an adequate return on their investments. To the extent that project financing is appropriate, sponsors need not pledge their own general credit beyond the required completion undertakings. Corporate finance looks to the credit of an existing corporate entity other than the project company to support debt repayment. OPIC can provide medium- and long-term financing in countries where conventional financial institutions often are reluctant or unable to lend on such a basis. Since its programs support private-sector investments in financially viable projects, OPIC does not offer concessionary terms usually associated with government-to-government lending, nor does it typically offer financing of export sales unrelated to long-term investments in overseas business. OPIC will not lend to projects that can secure adequate financing from commercial sources. Back
Project financing, on the other hand, looks to the cash flows generated by a specific project for repayment of the loan. In project financing underwriting, OPIC carefully analyzes the economic, technical, marketing, and financial soundness of the project to determine its creditworthiness. There must be adequate cash flow to pay all operational costs and to service all debt. It is expected that collateral will be provided to secure the loan, either in the host country or in the U.S. The project sponsors are expected to support the overseas operation until certain specific tests for physical completion, operational implementation, and financial soundness are met. To the extent that project financing is appropriate, sponsors may not need to pledge their own general credit beyond required completion undertakings. Back
The minimum amount for a corporate finance-style loan is $100,000, although OPIC has historically supported small businesses with loans over $1 million. The term of the loan is determined in relation to the attributes of the project, with a 3-7 year range being typical. This tenor usually includes an interest-only grace period, with interest payable quarterly in arrears from the date of the initial loan disbursement. The primary source of repayment for the loan will be the borrower’s own operating cash flow (as distinguished from the project’ cash flow). Any project sponsor with 25 percent ownership or more may be asked to demonstrate commitment to the project by providing payment guaranties. OPIC considers the provision of guaranties and/or liquidation of collateral as secondary sources of repayment. If the borrower is a subsidiary of a sponsoring U.S. small business, the sponsor may be asked for a life of loan corporate guaranty. Back
The minimum amount for a project finance-style loan is generally $100,000, although OPIC has historically supported small businesses with loans over $1 million. Guarantees are available up to $200 million. The term of the loan is also determined in relation to the attributes of the project being financed, typically with a 3-15 year range available. Generally, operations with long construction periods will require longer tenors than operations that can be implemented quickly. This tenor usually includes an interest-only grace period, and with interest payable quarterly or semi-annually in arrears from the date of the initial loan disbursement. The primary source of repayment for the project finance-style loan will be the overseas project’s own operating cash flow (as distinguished from cash flow of the sponsor). The collateral, also offered as a secondary source of repayment, could be located in the host country or in the U.S. Any project sponsor with 25 percent ownership or more may be asked to demonstrate commitment to the project by providing completion guaranties to ensure that the operation is established and in operation. Once the project has met certain pre-defined physical, operational, legal and financial tests, the guaranties may be reduced or eliminated altogether. Back
Financing
Techniques Under both financing techniques, the borrower approaches OPIC to analyze and structure financing for an overseas project. OPIC determines the appropriate terms of borrowing and, where a guaranty is sought rather than a direct loan, may assist in identifying financial institutions willing to provide the needed funds. Guaranties are issued to U.S. financial institutions more than 50 percent beneficially owned by U.S. citizens, corporations or partnerships. Foreign corporations that are at least 95 percent U.S. owned are also eligible, as are other foreign entities that are 100 percent U.S. owned. Typical funding institutions include insurance companies, pension funds and commercial banks. These lenders are protected by the full faith and credit of the United States of America. OPIC-guaranteed loans are classified as eligible U.S. government securities for insurance companies and many other institutional investors. Back Loan
Terms
All projects or transactions considered for OPIC financing must be commercially and financially sound. They must be within the demonstrated competence of the proposed management, which must have a proven record of success in the same or a closely related business, as well as a significant continuing financial risk in the enterprise. OPIC's criteria are the same whether it is making a direct loan or issuing a loan guaranty. OPIC provides financing for a wide range of enterprises under terms and conditions sufficiently flexible to permit sound development projects to be implemented. Back
Financing will not normally be available for investments in enterprises majority-owned and controlled by a foreign government. Financing is not available for projects that can secure adequate financing from commercial sources. Back Application
Procedures
The data prepared and submitted by sponsors to substantiate sources of raw material, technical feasibility and market demand are carefully analyzed together with the financial forecasts. In some instances, OPIC retains independent consultants to assist in its analysis and review. Following OPIC’s preliminary review and approval, the sponsors may be asked to provide additional economic, financial and technical information as a formal application for financing. Such information is essentially that which any board of directors would need before committing its company to an investment. Guidelines for formal applications will be provided, though the type of information to be supplied will vary with the nature of the proposed business. Back Length
of Application Process
FAQ'sI want to export tractors to Emergistan. Is my project eligible for OPIC financing?EXIM may be a better fit since this is pure export financing. OPIC financing is designed for new investment in Emergistan. However, if you wanted to establish a warehouse there and needed financing for that, OPIC could consider both requests as a "project." Back
How long does it take to obtain OPIC financing from application to disbursement?OPIC's staff processes financing applications as quickly as possible. OPIC is aware that a timely "no" response can be just as important as a loan approval. The time from initial contact to disbursement can range from three to six months or more depending on complexity. The speed with which a transaction can be approved and disbursed depends upon the performance of many parties. The best way to ensure the receipt of funds quickly is to complete all information requests in a careful and timely manner and keep the transaction simple, and, if possible, under the jurisdiction of U.S. law. Complex, multi-party transactions take considerably longer.
As a U.S. small business as defined by OPIC, we are entering into a joint venture in which our firm will own only 18 percent of the equity. My company will also be providing management expertise, training and some equipment. Is the project eligible for OPIC financing?Yes, for direct loans available to U.S. small businesses and cooperative, the only requirement is that there be significant involvement of the U.S. small business. Back
My company has been working to obtain a contract for five years. We have incurred significant development expenses. Are these eligible for project financing?OPIC investment officers and their counsel and perhaps consultants will review the expenses to determine their age and the appropriateness of purpose with respect to the project. OPIC generally expects these types to expenses to be paid with sponsor equity unless there is a valid reason for financing them over a longer period. Back
Our expansion overseas will not only require capital financing for property, plant and equipment, but also permanent working capital. Can OPIC assist us?Yes. Permanent working capital is a significant start-up expense of a project and therefore eligible for OPIC long-term financing. Back
Does my work for twenty years for a major chemical manufacturer in polymer production count toward establishing a "track record"?Yes. Back
What does "successful" track record mean?It generally means three years or more in consistent, profitable operations as evidenced in audited financial statements. Back
What is an Environmental Impact Analysis and how do I find out more about OPIC's environmental standards?OPIC's environment page will provide the answers to your questions about Environmental Impact Assessments and a discussion of the World Bank Guidelines to which OPIC must adhere. Back
Our joint venture is a second level subsidiary of a Fortune 500 U.S. company. Will it qualify for a direct loan from OPIC?OPIC researches the ownership structure in determining whether an entity qualifies as a U.S. small business under its definition. Unless there is a qualifying U.S. small business with significant involvement in the transaction, if approved, the funding would need to be in the form of an investment guaranty. Back |
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OPIC's mission is "to
mobilize and facilitate the participation of United States private
capital and skills in the economic and social development of less
developed countries and areas, and countries in transition from
non-market to market economies, thereby complementing the development
assistance objectives of the United States …"
Corporate
Finance Loans
