Egypt continues to convert deposits received from Qatar into fixed-term notes, after the sovereign privately placed a US$1 billion bond in early July, its second such deal in just over a month.
Egypt issues bond from Qatar's deposit lifeline
The new US$1 billion three-year bond was issued on July 1 at par to yield 3.5 per cent via HSBC and QNB Capital. It follows a $2.7bn, 18-month senior unsecured deal which priced at a yield of 4.25 per cent in late May, part of a $5.5bn lifeline from Qatar that is expected to be converted into securities.
Both were issued from a $12bn EMTN programme set up earlier this year.
The latest transaction was completed just days before the removal of Mohammed Morsi as president.
"(The deal) was planned before any of the demonstrations," said a source familiar with the transaction. "Thankfully it closed before those events."
The source said the Caa1/CCC+/B- rated country's plan to sell more bonds under the programme remains in place, despite a change in leadership in both Egypt and Qatar.
"There was a plan to issue more," the source said. "But obviously there are new complications now and there has been a change in the Qatari leadership as well. There will definitely be a period of uncertainty."
If other deals are to go ahead, Egypt would need to issue a supplementary prospectus highlighting the new risk factors in the wake of Mr Morsi's removal, he said.
"Our assumption is that the new emir in Qatar will continue to support Egypt," said Paul Gamble, head of Mena sovereigns at Fitch.
"What we could also see now is more from Saudi Arabia and the UAE in terms of monetary support (for Egypt), particularly the UAE. It is significant that the Egyptian central bank governor went to the UAE this week," he said.
Egypt needs the inflows to keep afloat. The Qatari funds alone are not sufficient to alleviate the shortage of foreign exchange in the economy, he said.
The country's foreign reserves hit a low of $13.4bn in March, less than needed to cover three months of imports. Deposits and loans from Qatar and Libya have helped the country prop up its foreign exchange stockpile, which rose to $16.1bn in May before sliding $1.12bn to $14.9bn in June, according to official figures.