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Mexico - Enhanced Bridge Loan Repackage

OPIC. What is OPIC?Created as an agency of the U.S. government in 1971, the mission of the Overseas Private Investment Corporation (

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Mexico - Enhanced Bridge Loan Repackage

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    1. Mexico - Enhanced Bridge Loan Repackage Alexander Evans - Senior Commercial Counsel

    2. OPIC What is OPIC? Created as an agency of the U.S. government in 1971, the mission of the Overseas Private Investment Corporation (“OPIC”) 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 nonmarket to market economies.

    3. Form of OPIC Support OPIC accomplishes its mission through the provision of loans and guarantees and the issuance of political risk insurance for eligible transactions.

    4. Eligibility At a minimum, in order to be eligible for OPIC support transactions must: Have a commercially viable business plan and Sponsors with a successful track record; Have sufficient U.S. nexus; Take place in countries in which OPIC is open for support; Involve projects that meet environmental, labor and human rights standards, as well as anti-corruption guidelines; and Be developmental in nature and additional to the market.

    5. OPIC Housing Program Four essential components of OPIC’s housing program: Mortgage Finance; Land Development and Construction; Lease Purchase Finance; Mortgage Securitization – including Mezzanine Finance; and Workforce housing.

    6. OPIC Housing Objectives To support affordable homeownership for local families ($10,000 to $50,000) To fill “gaps” in local funding sources To partner with private companies wherever possible To support implementation of government policies through the private sector

    7. OPIC Capital Markets Program PRI inconvertibility and transferability Financial guarantee “wrap” – up to 75% of the total issuance Senior/Sub structure 75%/25% - OPIC covers 100% of senior bonds, all risk guaranty Mezzanine financing – direct loan program U.S. institutional investors must purchase at least 25% of the covered bonds Risk share with monoline insurance company

    8. OPIC Capital Market Program Criteria Shadow/provisional rating required Pricing dependent upon “OPIC value added” New originations or existing portfolios (must reinvest in new mortgages) Local currency securities acceptable, with dollar cap on OPIC Guaranty OPIC policy criteria may apply

    9. Standard Terms Loan term Amortization of up to 15 years, 20 years on limited basis Amount of OPIC participation $100k to $250 million per project Leverage 60% debt to 40% equity (mortgage programs may vary) Pricing A spread over relevant U.S. Treasury, plus transaction fees Limited recourse financing Reliance on mortgage cash flows and mortgages as collateral Repurchase or first loss provision usually required

    10. Recent OPIC Guaranteed Transaction OPIC-Enhanced VFN Program: Reforma BLN-Backed I (the “Issuer”) issued Variable Funding Notes (“VFN”) backed by eligible underlying Bridge Loan Notes (“BLN”). Underlying BLNs are senior notes structured to BBB+/BBB global local currency ratings benefiting from subordination (via mezzanine notes and/or overcollateralization) and excess spread. BLNs backed by Mexican land, infrastructure, and low income residential construction loans (“bridge loans”) as collateral Issuer may only purchase BLNs that comply with the predefined eligibility criteria All BLN and VFN cashflows are in Mexican Pesos OPIC Guaranty denominated and capped in U.S. dollars BLNs and VFNs function like revolvers. The outstanding balance of the VFNs is adjusted by draws under and prepayments of the underlying BLNs Program Size: Maximum program size is Mexican Peso equivalent of US$330MM Program expected to ramp up to maximum facility amount in next 18 months

    11. Introduction Partial Credit Guarantee: OPIC provides a guaranty of 75% subject to US$250,000,000 cap. Upon the occurrence of an event of default on an underlying BLN, OPIC’s guaranty will cover timely interest and ultimate principal under each underlying BLN. Pass-through Interest Rate: All underlying notes are indexed to TIIE (i.e. floating rate coupon resetting monthly). Underlying BLNs’ interest passed through to VFN investors. Final Maturity: VFN has six year revolving period, followed by two year amortization period. Eight year legal final maturity.

    12. Structure Chart

    13. Cash Flow/Credit Support The Program issues VFNs collateralized by senior BLNs from a number of construction loan securitization facilities underwritten by Deutsche Bank Underlying BLNs are rated BBB+/BBB and each benefit from subordination and/or overcollateralization OPIC provides a 75% guaranty at VFN level

    14. Terms and Conditions

    15. Terms and Conditions (continued)

    16. VFN Mechanics The diagram below assumes that there will be a total of five underlying BLNs in the Program The diagram below provides an illustrative example of the overall utilization of the Reforma Program The outstanding balance of the VFNs is adjusted by the (i) draws and (ii) pay downs of the underlying BLNs during each collection period

    17. Transaction Overview Commitment Termination Triggers Collateral Requirements Sofol/Sofom specific Eligibility Criteria Developer specific Eligibility Criteria Underlying Bridge Loan Notes Events of Default Reforma-Level Events of Default

    18. Conclusion OPIC-Enhanced VFN Program Benefits. The Program should be beneficial for the market for a variety of reasons: Addresses need for affordable housing in Mexico. Supports construction finance by small and mid-size developers and Sofoles with less access to capital on flexible terms. Promotes adherence to international standards relating to environment, health, safety and anti-corruption. Variable funding structure addresses a gap in the market. Allows risk diversification within singular industry. Allows investors with credit lines full on individual issuer names to purchase more BLNs. Allows investors with credit lines full on Mexico to purchase more BLNs with primary exposure to OPIC (US Government entity). Improves market liquidity. Helps eliminate inefficiencies in the market. Promotes local currency, Mexican BLNs.

    19. Transaction Parties

    20. More Information For more information, finance applications and contact information, visit our website: http://www.OPIC.gov To discuss your project, please contact Alexander Evans – Senior Commercial Counsel (202) 336-8705 alexander.evans@opic.gov OR Debra Erb – Director of Housing Programs (202) 336-8472 debra.erb@opic.gov

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