Information Request on Financing Support for Covered Technology Categories-Specific to Companies and Trade Associations

AGENCY:

Office of Strategic Capital (OSC), Office of the Under Secretary of Defense for Research and Engineering, Department of Defense (DoD).

ACTION:

Notice; request for information (RFI).

SUMMARY:

The OSC is seeking information from companies and trade associations regarding strategic capital needs for industries related to the Covered Technology Categories to inform the design and implementation of the DoD Loan Program.

DATES:

Comments must be received by October 22, 2024. Written comments in response to this RFI should be submitted in accordance with the instructions in the ADDRESSES and SUPPLEMENTARY INFORMATION sections of this notice.

ADDRESSES:

Interested parties may submit comments on this transaction electronically on www.regulations.gov. To submit a comment, enter “Information Request on Financing Support for Covered Technology Categories—Specific to Companies and Trade Associations” under the heading “Enter Keyword or ID” and select Search. You can also search by the Docket ID, DoD-2024-OS-0073. Follow the instructions provided at the `Submit a Comment screen'.

Comments can also be sent by mail to Department of Defense, Office of the Assistant to the Secretary of Defense for Privacy, Civil Liberties, and Transparency, 4800 Mark Center Drive, Mailbox #24, Suite 08D09, Alexandria, VA 22350-1700.

Please include your name, company name (if any) and “Information Request on Financing Support for Covered Technology Categories” on any attached document.

Comments sent by any other method, to any other address or individual, or received after the end of the comment period, may not be considered.

FOR FURTHER INFORMATION CONTACT:

For questions about this notice, please contact David Vidal, Office of Strategic Capital Director of Credit Programs, at Federal.Register.Notice@osc.mil, Tel. No. 703-545-1903. Please direct media inquiries to the OSC Press Team at engagements@osc.mil.

SUPPLEMENTARY INFORMATION:

Background

In December 2022, the Secretary of Defense established OSC to attract and scale private capital to technologies critical to the national security of the United States. Furthermore, in 2024, Congress authorized OSC as part of the National Defense Authorization Act (NDAA) for Fiscal Year 2024. The NDAA states that OSC shall:

(a) develop, integrate, and implement capital investment strategies proven in the commercial sector to shape and scale investment in critical technologies and assets,

(b) identify and prioritize promising critical technologies and assets that require capital assistance and have the potential to benefit the DoD, and

(c) make eligible investments in such technologies and assets, such as supply chain technologies not always supported through direct investment.

Covered Technology Categories

The NDAA designates the following 31 categories as a “Covered Technology Category.”

• Advanced bulk materials (including dielectrics, alloys, polymers, and composites)
• Advanced manufacturing (including upgrades for increasing the efficiency or quality of existing production processes or for enabling commercialization of new technologies)
• Autonomous mobile robots
• Battery storage (including lithium ion, advanced lead acid, and alternate batteries, as well as fuel cells)
• Biochemicals
• Bioenergetics
• Biomass (including conversion-ready feedstock)
• Cybersecurity
• Data fabric (including integration across disparate domains)
• Decision science (including ensemble learning methods for portfolio optimization)
• Edge computing
• External communication
• Hydrogen generation and storage
• Mesh networks (including off-grid communications)
• Microelectronics assembly, testing, or packaging
• Microelectronics design and development
• Microelectronics fabrication
• Microelectronics manufacturing equipment
• Microelectronics materials
• Nanomaterials and metamaterials
• Open RAN
• Optical communications (including free space and optical fiber)
• Sensor hardware
• Solar (including power system and management components)
• Space launch
• Spacecraft
• Space-enabled services and equipment (including in-space operations and associated ground equipment)
• Synthetic biology
• Quantum computing
• Quantum security
• Quantum sensing

The NDAA authorizes OSC to provide capital assistance, defined as a “loan, loan guarantee, or technical assistance” for eligible investments. Eligible investments are those made in a technology that is (a) in a Covered Technology Category and (b) not solely utilized in defense applications. OSC is seeking public comment on the capital needs of industries and assets related to the Covered Technology Categories to inform the design of DoD loan program.

Specific Requests for Information

The following statements and questions cover the major topic areas for which OSC seeks comment. They are not intended to limit the topics that may be addressed. Responses may include any topic believed to inform the U.S. Government's efforts in developing recommendations for supporting the design of the DoD Loan Program, regardless of whether the topic is included in this document.

Respondents are encouraged to respond to any or all of the following questions and topic areas. Responses may include estimates, which should be designated as such. Your responses may include supporting data and examples. We welcome submission of publications or studies that support your responses as attachments.

Questions

The questions section of this Federal Register notice is split into four parts: (a) General, (b) Financing, (c) Economic Outlook, and (d) Competition.

General

1. From the Covered Technology Categories referenced in the Background of this SUPPLEMENTARY INFORMATION section, please select at least one Category that best represents your company.

2. What is the 6-digit North American Industry Classification System (NAICS) code for your business? If your business has more than one NAICS code, please list those associated with the Covered Technology Categories noted in your response to Question 1.

3. Does your company largely produce, integrate, or otherwise use equipment and/or services for a purpose that aligns with any of the Covered Technology Categories enumerated in the Background section? Please list each Covered Technology Category and define the relationship.

4. What are the primary technology asset(s)/equipment utilized in your sector for production or provision of services? What is the typical useful life of these technology equipment/assets?

5. Is there a secondary market for the technology equipment/asset(s) noted in Question 4? If so, how is the secondary market value typically established ( e.g., public benchmark, appraisals, etc.)?

6. If applicable, how are these technology equipment/asset(s) transported from the source of origin to your facilities (airship, sea ship, rail, trucks)? If shipped via sea, are you/or your supplier able to transport them on a U.S.-flagged vessel?

7. How long has your company been in business? How many years has your firm operated in the specified Covered Technology Category?

8. What was your company's annual revenue over the past five years? (Please list each year and the respective annual value).

9. What were your company's earnings before interest and taxes (EBIT), and EBIT margins from the past five years? (Please list each year and the respective annual value).

10. What is your company's actual or implied Credit Rating Agency rating ( e.g. BB+, Ba1, etc.)?

11. What is the current size of your company by employee count?

12. In which city, state, and countries are your company's headquarters, and manufacturing plants located?

13. In which geographies are your suppliers most concentrated? Please specify the state(s) or country(ies) if foreign.

14. In which geographies are your customers most concentrated? Please specify the state(s) or country(ies) if foreign.

15. Who are the major lenders in your market segment ( e.g., banks, specialty firms, private credit)? Please specify the institutions.

16. What percentage of your annual revenue has been spent on Research and Development (R&D) over the past five years? (Please list each year and the respective annual value).

17. What percentage of your annual revenue has been spent on capital expenditures (CapEx) over the past five years? (Please list each year and the respective annual value).

18. How often is capital expenditure (CapEx) funding usually needed ( e.g., once every three years)?

Financing

19. Have you previously used any form of U.S. Government funding? If so, please specify which funding tool(s) your company used and how ( e.g., loans, loan guarantees, etc.). If not, please specify why.

20. Have you ever accessed or attempted to obtain Federal credit ( e.g., direct loans or loan guarantees) in the past, or are you considering it in the future? If so, please specify the Federal credit programs or institutions.

21. Have Federal credit programs been able to successfully address the funding needs in your market segment? Please explain.

22. Which types of debt financing are currently available to your company for the purposes of working capital, capital/equipment lease or purchases, and acquisition?

23. What are the sources of debt financing in your market segment ( e.g., Banks, Credit Unions, Non-Bank Lenders, Funds, etc.)?

24. On average, how long does it take a company in your market segment to secure the needed debt funding for working capital, capital/equipment purchases or leases, acquisitions, etc.? How critical is the speed of funding availability in your line of business?

25. What are the typical terms for such debt instruments ( e.g., debt/equity ratio, repayment tenor, fund availability period, grace period, amortization structure, security/collateral package, covenants, interest rates, credit spreads, etc.)?

26. What are the limitations with existing forms of debt capital available to your company or sector ( e.g., type, cost, availability, covenants, eligibility, etc.)?

27. What are the typical debt instruments used to fund the procurement of the technology assets/equipment in your sector?

28. What forms of working capital funding are available to companies in your market?

29. Have you deferred production expansion due to lack of access to capital or the cost of capital?

30. What is the seniority level of the typical debt instrument in your market? Are there any covenant restrictions preventing additional borrowing that is pari-passu or senior to existing debt on your balance sheet (if any)?

31. What are some of the limitations or challenges in accessing funding in your sector?

32. Are there any niche areas in your sub-sector that struggle with accessing the needed debt capital? Please describe the reasons for this.

33. Would you benefit from OSC offering any of the following types of loan or loan guarantees: working capital loans or lines of credit, asset-backed loans, equipment financing, or acquisition financing?

34. Subject to the criteria and eligibility requirements to be determined by OSC, what factors should OSC consider important when reviewing applications for the DoD Loan Program?

Economic Outlook

35. What is your outlook on the five-year macroeconomic projection for your industry? What macroeconomic headwinds/tailwinds are most impacting you?

Competition

36. Who are the main competitors in your space? Where are they located geographically? Please list the city and state, if known. If the competitor is located overseas, please list the city and country.

37. Do you have foreign competition in your industry? Foreign competition is defined as a competing firm with headquarters outside of the United States. If yes, please list the firm(s) as well as the country they are headquartered in.

38. Are you aware of or facing competition backed by foreign government financing? If so, please identify the competition and the type of foreign government financing provided.

Requirements for Written Comments

OSC encourages respondents, when addressing the points above, unless raising other challenges related to financing Covered Technology Categories not explicitly asked, to identify which point they are responding to by using the same numbers and heading as set forth above. For example, someone submitting comments responsive to (9), “What is your company's actual or implied Credit Rating Agency rating ( e.g. BB+, Ba1, etc.)?”, would use that same text as a heading followed by the respondent's specific comments responding to it. This formatting will assist OSC in more easily reviewing and summarizing the comments received in response to these specific points of inquiry.

Anyone submitting business confidential information should clearly identify the business confidential portion at the time of submission, file a statement justifying nondisclosure and referring to the specific legal authority claimed, and provide a non-confidential version of the submission. Users submitting a form that contains business confidential information will need to submit a non-confidential version of the same form that does not contain the confidential business information. The non-confidential version of the submission will be placed in the public file on https://www.regulations.gov. For comments submitted electronically containing business confidential information, the file name of the business confidential version should begin with the characters “BC.” Any page containing business confidential information must be clearly marked “BUSINESS CONFIDENTIAL” on the top of that page. The non-confidential version must be clearly marked “PUBLIC.” The file name of the non-confidential version should begin with the character “P.” The “BC” and “P” should be followed by the name of the person or entity submitting the comments.