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Tuesday, 26 May 2020

Egypt issues eurobonds worth $5 bln, biggest issuance in its history

The issuance is part of efforts to provide needed funds to deal with the repercussions of the coronavirus, the finance ministry said

Menna Alaa El-Din , Friday 22 May 2020
Finance minister Maait
File Photo: Finance minister Mohamed Maait (Photo: Reuters)
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Egypt has issued dollar-denominated eurobonds worth $5 billion to provide urgent funding to deal with the coronavirus crisis, the finance ministry announced on Friday, describing it as the biggest international bond issuance in its history.

The ministry said the issuance was in three tranches with maturities of four, 12 and 30 years, and was mainly aimed at providing the necessary liquidity to cover the needs of the upcoming 2020/2021 fiscal year, which begins on 1 July.

The issuance is also part of efforts to provide the needed financing to deal with the repercussions, of the coronavirus, according to a ministry statement.

Finance Minister Mohamed Maait said subscription orders had reached $22 billion before the end of the issuance, with the offering more than four times oversubscribed.

The subscription exceeds those seen by international bond issuances for emerging countries in the past month, Maait said, adding that it reflects the international community’s confidence in the efforts and outcomes of Egypt’s economic reform programme.

Deputy Finance Minister Ahmed Kojak said the bonds issuance is the biggest in the country’s history, enabling it to achieve the biggest value in subscriptions to international bonds issued by an African state.

He said the issuance has attracted bids by over 400 investors, including 60 new investors who were subscribing to Egypt’s international bonds for the first time.

The bids, which came from investors in the US, the EU, Asia, the Middle East, and Africa, allowed the ministry to lower yields on offered bonds by around 50 basis points compared with the initial price guidance.

Egypt sold $1.25 billion in four-year bonds at 5.75 percent, $1.75 billion in 12-year bonds at 7.625 percent and $2 billion in 30-year bonds at 8.875 percent, Kojak said.

He added that the issuance would help provide additional financing sources for the budget in the upcoming period and the longevity of Egypt’s bonds portfolio and the average life of the debt stock.

The issuance is the second during the current 2019/2020 fiscal year, after a $2 billion triple-tranche eurobond issuance in November.

That issuance included $500 million of four-year bonds, $1 billion of 12-year bonds, and $500 million of 40-year bonds. It attracted $14.5 billion in subscriptions. The 40-year bonds have the longest maturity of bonds issued in the Middle East and North Africa.

Thursday's issuance comes nearly a week after Egypt secured $2.772 billion from the International Monetary Fund (IMF) under the Rapid Financing Instrument (RFI) to meet urgent balance of payments needs amid the pandemic.

Egypt is currently in talks with the IMF for an emergency fund of over $5 billion from the International Monetary Fund through a Stand-By Agreement.

The deal would finance half of this year’s funding gap, estimated at about $10 billion by EFG Hermes and Goldman Sachs, according to Bloomberg, as the country's main foreign currency sources, including tourism, remittances and Suez Canal receipts continue to suffer over the virus outbreak. 

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