Attachment_4 _Credit_Rating_Memorandum.pdf

Attachment #4

Island 180 LLC March 2016

I. Summary

Country/Project ID Island / 521-2011-984 DI Borrower Island 180 LLC Sponsor Michael Jordon, Scotty Pippen and Charles

Barkley Guarantors HT 180 Consortium, S.A. & Addidas, S.R.L.

Project Completion Guarantors Company Island, S.A. 4 Wastecycling,S.I., NAC3 C. A., Construction Materials Consulting Group LLC and Akaba Energy, S.A.

Originating Team

• Team Leader

• Officer

• Attorney

• Debra

• Michael

• Peter

Monitoring Team (Current)

• Team Leader

• Officer

• Attorney

• Jeff

• John

• Miguel

Business Outline Construction of concrete manufacturing facilities (batching plants) in Island, the operation of a fleet of mixing trucks to deliver concrete and the placement of concrete at construction sites.

Principal Balance $4,406,202.44 (as of 2/29/16) Past Due –Principal, Interest & Fees $1,879,886.61(principal) $122,458.03

(Interest) and $-0- (fees) (as of 2/29/16) Accrual Status Non-Accrual Current Risk Rating (1-12) 12 Recommended Risk Rating (1-12) 12 Current Loss Given Default % 55% Recommended Loss Given Default % 55% Collateral Security (description, value, loan to value )

Pledge of shares in Island 180 LLC and a blanket lien on all assets including equipments and rolling stock. $2,480M is the estimated liquidation value for fixed assets.

Accounts receivable also secure the loan but their value is being excluded in the interests of conservatism.

Covenant Compliance Out of compliance Previously Restructured (yes/no)(date if yes)

No

Amounts Charged Off (N/A or $ value and date)

None

II. Reason for Credit Rating, reason for the Reserve change, and justification for the Reserve Level

Risk Rating:

• In May 2013, the Borrower was experiencing cash flow shortfalls and asked OPIC for a one-year grace period for principal payments that were scheduled to begin on June 15, 2013. The loan became past due by in June 2013 and was placed on non-accrual status in September 2013.

• In a December 2013 WAP, OPIC approved the Borrower’s request for a 12-month grace period on its principal payments in exchange for the pledging of new real estate collateral by two of the Island Sponsors.

• There has been on-going delays placing a lien on the real estate collateral that was promised as part of the early 2014 restructuring request outlined above. In the meantime, the Borrower has made some partial principal payments and all of the interest payments as if the restructuring was in place but in June 2015 the interest payments stopped.

Loan Loss Reserve:

The recommended loan loss reserve is based on the estimated liquidation value of the collateral. The loan is secured by four concrete plants, testing lab equipment, rolling stock, and various other vehicles.

The total purchase price of the equipment, net of shipping costs and import taxes, was $4,490M. Using a 50% discounted value for used equipment, the value for this collateral is estimated to be $2.25M. The estimated loan loss if the collateral is sold would be $2.7 million or 50% to 60%% of the loan balance.

III. Anticipated Action

The project team is moving forward with a WAP to approve the restructuring. The WAP will be circulated for review and approval in early April. The project team’s objective is to strengthen OPIC’s collateral position by closing the restructuring and adding the commercial real estate as collateral.

If the Borrower defaults on the restructured payment plan, then OPIC will: (1) Prepare a WAP to approve declaring a payment default and accelerating the loan, (2) Issue a guaranty call to Company Island, S.A.

and Construction Materials Consulting Group LLC, (3) if the guarantors do not honor the guaranty call, OPIC will pursue a judgment against them in New York courts and then seek to enforce the judgment in Island.

IV. Update

In March 2016, OPIC and the sponsors finalized negotiations on a proposed workout plan that includes Island 180 pledging real estate collateral, changing a project completion guaranty to a life of loan guaranty for two companies and reducing operating expenses to improve cash flow in exchange for the following changes to loan agreement:

• All past due interest accrued interest to be paid when the amendment to the loan agreement is signed

• The loan maturity extended nine years to December 2026 from the current maturity of December 2017.

• Island 180 to pay interest only in 2016. A graduated principal payment schedule starting in 2017 with $50,000 per quarter and increasing to $200,000 per quarter closer to maturity.

• 50% of excess cash flow above an agreed upon formula for “free cash flow” will but used to pay unscheduled principal payments on the OPIC loan.

• A new DSRA will be established in stages with full funding by Q3 2017.

V. Background

Island 180 LLC, which was launched in April 2011, is a project to produce high quality concrete in Island for re-development and construction projects. As of February 2013, the Borrower has four batching plants set up at strategic locations in Port Au Prince, Cap Islanden and Gonaive. Island 180 also has a fleet of mixing trucks that deliver concrete to construction and road projects. In May 2011, OPIC provided its first disbursement to the borrower, which used the funds to purchase eight mixing trucks, a batching plant, two concrete pumps, several Caterpillar loaders and other equipment (this repeats prior two sentences-revise). Production of concrete increased significantly in the last quarter of 2011 and the first quarter of 2012 as the new equipment was put in place and the Cap Islanden plant started production for several large projects at the airport and a new industrial park in that part of Island. Island 180 also set up a state-of-the-art laboratory to conduct testing on input materials and concrete samples.

The borrower also provided concrete to a large project for the expansion and rebuilding of the Cap Islanden Airport runway. The manager of the project, Albeit, a Venezuelan construction management company, owes Island 180 just over $7 million for its work on the airport runway. Albeit has not paid any of the contractors since November 2012 due to a lack of funding from the government of Venezuela, which is lending the money to the Island government for the airport project. Island 180 continues to finish its work at the airport even though it has not been paid as it hopes to provide concrete for the second phase of the airport project, which includes the terminal building, control tower and fire control station starting later in 2013. The large receivable due to its work with Albeit is Island 180’s major cash drain.

Other large projects completed by the Borrower in 2013 was $2.9 million for work on a new hospital in Gonaive, Island which was completed in December 201. Another large project currently underway for the Borrower is a prison under construction north of Port Au Prince that is being built by Company Island, one of the Project sponsors.

During a site visit in May 2013, Island 180 asked for a deferral of principal payments for one year while it attempted to collect the accounts receivable from the airport and start its aggregate stone to the concrete operations. OPIC told the Borrower it would consider the request. The principal payments that was due in June, September and December of 2013 and in March 2014 were not made by the Borrower but the interest and loan fees were paid.

A WAP requesting the principal payment deferral in exchange for additional real estate collateral was approved by OPIC in December 2013. The restructuring calls for deferring the first four quarterly principal payments– due June, September and December 2013 and March 2014. The new start date for principal payments will be June 2014 and the loan maturity date will be extended to December 2019. The owners of the Sponsor and project guarantor company, Company Island, have offered OPIC additional collateral in exchange for giving the Borrower a one-year deferral on its quarterly principal payments. The proposed new collateral is a 12.8 acre undeveloped commercial lot located north of Port Au Prince.

Outside legal counsel in Island has confirmed that OPIC should be able to enforce it lien in the event of a default. An appraisal dated February 2014 values the property at $1.5 million or $121,000 per acre.

As approved in the December 2013 WAP, the DSRA was closed and the funds were applied to pay down the principal balance of the loan by $482M in January 2014. The monitoring officer visited the Project in the last week of March 2014 to inspect the new real estate collateral property, see the re-located headquarters and main batching plant and tour the new aggregate processing plant. The new real estate collateral, which is vacant land, is located along a main highway north of Port Au Prince and is adjacent to a container port facility that is under construction. No evidence of environment hazards or squatters were found on the property. Several construction projects that are using the Borrower’s concrete were also visited. Despite repeated requests and reminders, the audit for fiscal year 2013 has yet to be delivered to OPIC. Internal financial statements continue to be provided on a timely basis.

The restructuring of the loan originally scheduled to start in June 2014 when quarterly principal payments of $290M were to begin. With the real estate closing and the restructuring delayed, the Borrower, as an act of good faith, and did paid OPIC all accrued interest owed and $649M in principal since June 2014. In August 2014, a notary was selected that was mutually acceptable to both OPIC and the sponsor that is offering the real estate as collateral. Since this time, continual delays have prevented the closing of the lien on the real estate collateral and restructuring.

In spite of the loan restructuring not yet taking place, the borrower has continued to make interest and partial principal payments but the loan remains past due for principal payments. In order to acknowledge existing defaults on the OPIC loan while all parties waited for the real collateral closing to occur, OPIC submitted a forbearance agreement to the sponsors in late 2014. The purpose and intent of the forbearance agreement had been explained and agreed to by the sponsors in Island but several non- Island based sponsors refused to execute the document and the agreement was never signed by the project company.

Given no other choice on how to acknowledge the existing defaults on the loan, OPIC issued a reservation of rights letter to the Island 180 sponsors on 5/18/2015 listing all of the existing defaults of the loan agreement including, among others, late payments, financial ratio covenant defaults and financial reporting violations.

In May 2015 the sponsors requested a meeting with OPIC to discussed a plan to extend the maturity of the loan. OPIC agreed to the June meeting but only if the sponsors submitted a detailed proposal outlining their restructuring request prior to the meeting. The sponsors did not provide a detailed written proposal and the meeting did not take place. In August 2015, Island 180 hired MultiNational Strategies Inc., an international business consulting firm based in New York, to produce a detailed business plan that supports the Borrower’s request to extend the maturity.

VI. Financial Analysis

Income Statement- Haiti 360 ($000's) Audit Audit Internal

12/31/2013 % 12/31/2014 % 12/31/2015 %

Revenue 11,394 100.0 9,061 100.0 7,666 100.0

COGS 9,131 80.1 5,569 61.5 3,702 48.3

Gross Profit 2,263 19.9 3,492 38.5 3,964 51.7

Total Operating Expenses 3,080 27.0 2,025 22.3 3,255 42.5

Operating Income (817) -7.2 1,467 16.2 709 9.2

Depreciation & Amort. 397 3.5 643 7.1 729 9.5

Interest Expense 518 4.5 568 6.3 411 5.4

Other Income/(Expense) (21) -0.2 76 0.8 1,673 21.8

Net Income (1,753) -15.4 332 3.7 1,242 16.2

EBITDA (838) 1,543 2,382

Comments Income Statement

• As can be seen from the last two fiscal years construction activity in Island has been trending down and as a result, Project revenues have declined by 20.5% in FY 2014 and 15.4 % in FY 2015

• Gross margin has improved FY 2014 and again in FY 2015 because Island 180 started producing its own aggregate for its ready-mx concrete instead of purchasing it from third-party suppliers.

• Operating margin in FY 2015 is on par with prior year results operating income is will be lower in FY

2015 due to lower revenues levels.

• EBITDA improved dramatically in FY 2014 compared to the prior year due to improved gross margins and lower common-size SG&A expenses.

• EBITDA in 2015 is over stated because of a one-time recovery of a charged-off account receivable that was expensed in 2012 and 2013 from the Cap Islanden airport project. Without this $1.5 million recovery, the EBITDA would be $882M, mainly caused by the lower revenue levels and increase in SG&A expenses.

Balance Sheet ($000's) Audit Audit Internal Assets 12/31/2013 % 12/31/2014 % 12/31/2015 %

Cash 308 2.4 340 2.6 3,237 27.6

Accounts Receivable-net 7,592 59.9 7,891 59.4 2,061 17.6

Inventory 259 2.0 367 2.8 210 1.8

Other Assets 1,591 12.5 362 2.7 2,087 17.8

Net Fixed Assets 2,930 23.1 4,324 32.6 4,116 35.1

Total Assets 12,680 100.0 13,284 100.0 11,711 100.0

Liabilities & Equity Accounts Payable/S.T. Debt 9,131 72.0 3,080 23.2 1,269 10.8

Accrued Expenses 232 1.8 402 3.0 465 4.0

Other LT Liabilities 167 1.3 6,900 51.9 5,136 43.9

Long Term Debt- OPIC 5,467 43.1 4,886 36.8 4,400 37.6

Total Liabilities 14,997 118.3 15,268 114.9 11,270 96.2

Total Equity (2,317) -18.3 (1,984) -14.9 441 5.9

Debt to Worth Ratio negative negative 25.6

Comments FYE 2015 Balance Sheet:

• At year end, the large cash balance is off-set by the large payable shown as the $5.1 million as an

“Other LT Liabilities” which is a payable to the government of Island related to the work done in 2013 for the Cap Islanden airport. Approximately $250,000 of the cash on the balance sheet is available to the Project.

• The accounts receivable are for various concrete contracts for construction projects.

• The most significant asset on the balance sheet are the equipment and rolling stock assets used for the business operations.

• The assets are supported by the payables to vendors, a small line of credit to a local bank and the long term debt to OPIC.

• Despite the improvement in equity, Island 180 remains highly leverage with a debt to worth ratio over

25x.