Egypt sells $5 billion in three tranches of bonds

Reuters , Ahram Online , Thursday 21 May 2020

File Photo: Central Bank of Egypt's headquarters is seen in downtown Cairo (Photo: Reuters)

Egypt sold $5 billion in bonds in three tranches on Thursday with maturities of four, 12 and 30 years, a document showed, as the country grapples with the economic fall-out of the novel coronavirus.

Egypt has been particularly hard hit by the impact of the pandemic on tourism, which is a major revenue earner.

Egypt sold $1.25 billion in four-year notes at 5.75%, $1.75 billion in 12-year bonds at 7.625% and $2 billion in 30-year notes at 8.875%, a document from one of the banks leading the deal showed.

Those levels were 50 basis points lower than those at which it began marketing the bonds earlier on Thursday. The deal attracted more than $6 billion in demand for each of the four and 12-year tranches and more than $7.6 billion for the 30-year bonds, the document showed.

Deputy central bank governor Rami Aboul Naga said the sale had attracted strong demand in a short period of time, adding there had been keen interest from investment funds and international institutions, state news agency MENA said.

Egypt has received demands on its eurobonds surpassed 20 billion dollars, banking sources told MENA.

The yield on Egypt’s dollar bond due 2049 rose 3 basis points to 8.76% on Thursday, paring a drop of 28 basis points earlier in the week. Funding costs were among the highest for an emerging-market sovereign since the crisis outset mid-March, with Bahrain selling 10-year notes at a yield of 7.4%.

The North African country wants to use the momentum from securing $2.8 billion in emergency cash from the IMF. The government in Cairo is also seeking more than $5 billion from the Washington-based lender under a separate stand-by arrangement and $4 billion from other sources, an official told Bloomberg last week.

The deal would finance half of this year’s funding gap estimated at about $10 billion by EFG Hermes and Goldman Sachs Group Inc as some of its main foreign-currency sources, including tourism, remittances and Suez Canal receipts, have plummeted due to the virus outbreak, according to Bloomberg. 

“Authorities are likely moving preemptively to raise additional buffers amid an uncertain global environment,” said Mohamed Abu Basha, the head of macroeconomic research at Cairo-based investment bank EFG Hermes.

Earlier this month, the International Monetary Fund said it had approved $2.77 billion in emergency financing for Egypt to help it weather the pandemic.

The government has taken steps to contain the outbreak, including a night curfew and the closure of cafes and mosques, but has stopped short of a full lockdown as it seeks to keep the economy going.

As of Thursday, Egypt had reported 15,003 confirmed cases of the coronavirus and 696 deaths.

Egypt hired BNP Paribas, Citi, HSBC, JPMorgan and Standard Chartered to arrange the debt sale, which is expected to close later on Thursday. 

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