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Abu Dhabi, UAESunday 23 September 2018

Egypt plans euro-bond sale of up to Dh4.5bn

Announcement comes after Cairo successfully raised $4 billion from international debt markets to finance the budget deficit

The headquarters of Egypt's Central Bank are seen in downtown Cairo. Mohamed Abd El Ghany/Reuters
The headquarters of Egypt's Central Bank are seen in downtown Cairo. Mohamed Abd El Ghany/Reuters

Egypt will begin approaching investment banks in a few days for a planned sale of euro-denominated bonds after successfully raising $4 billion from international debt markets to finance the budget deficit and bolster foreign reserves, Finance Minister Amr El Garhy said.

The sale of €1bn (Dh4.5bn) to €1.5bn euros in notes will “ideally” take place in April, and Egypt wants European banks to manage it, the minister said. On Tuesday, the government received about $12bn in offers for its dollar-denominated bonds, in what the minister described as a “vote of confidence” in the Egyptian economy.

The strategy of becoming a regular issuer on international markets will enable Egypt “to borrow easily and at relatively better pricing”, said Mohamed Abu Basha, an economist at investment bank EFG-Hermes in Cairo.

While the global market turmoil last week also hit the assets of developing nations, investors are still tempted by higher-yielding emerging debt in a world that remains awash with central bank stimulus. For the Egyptian government, however, borrowing costs on international markets remain much lower than local-currency debt.

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Tuesday’s issuance completely covers Egypt’s financing gap for the fiscal year ending June 30, Deputy Finance Minister Ahmed Kouchouk said. It brings to $11bn the total amount of international bonds Egypt has sold since floating the currency and securing a $12bn IMF loan in November 2016.

The terms for the latest issuance were less favorable than last year’s due to the increase in global interest rates, Mr El Garhy said.

“We could’ve secured cheaper pricing since our risk position has improved since the last time we tapped the market, but the rise in yields on US Treasuries has affected us,” he said.

Egypt’s foreign-currency reserves have been steadily increasing since 2016, climbing to a record $38.2bn January.

Tuesday’s issuance was broken down into three parts: $1.25bn in five-year notes with a yield of 5.58 per cent, $1.25bn in 10-year notes with a 6.59 per cent yield; and $1.5bn in 30-year notes with a yield of 7.9 per cent, the finance ministry said.

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