Egypt sells $3 bln US-dollar dominated eurobonds

Doaa A.Moneim , Friday 24 Sep 2021

The eurobonds issuance, which is the second of its kind this year, included six, 12 and 30 year-term types, with a value of 1.1 billion, 1.1 billion and 750 million, respectively

Egypt's finance ministry (Al-Ahram)

Egypt issued on Thursday US-dollar dominated eurobonds in three types with a total amount of about $3 billion, the Ministry of Finance announced on Friday.

Eurobonds issuance is one of the debt instruments the country resorts to in order to finance its budget’s financing gab and its debt.

The eurobonds issuance, which is the second of its kind this year, included six, 12 and 30 year-term types, with a value of $1.1 billion, $1.1 billion and $750 million, respectively, according to the ministry.

Ministry of Finance Mohamed Maait stated that the issuance witnessed a significant turnout from the foreign investors, adding that the subscription on the bonds reached a value of $9 billion, which is three times a total value of the sold bonds.

He added that this turnout encouraged the ministry to instruct the banks who were responsible for arranging the deal to decrease the interest rate to a minimum compared to the interest rates on the eurobonds in other countries that have the same credit rating of Egypt, which reflects the investors’ increasing confidence in the Egyptian economy.

JPMorgan Chase & Co., Citigroup Inc., HSBC Holdings Plc, First Abu Dhabi Bank and Standard Chartered managed the subscription.

Thursday's issuance comes one day after the US Federal Reserve announced keeping the benchmark interest rates near zero.

Maait explained that the proceeds of this issuance will contribute in providing extra foreign exchange for the country, which will be used in partially covering its financing needs in the current fiscal year FY2021/22.

Meanwhile, Ahmed Kojok, the deputy finance minister for financial policies, said that this issuance includes interest rates lower than other eurobonds in the global debt instruments market, especially amid the ongoing challenging time caused by the pandemic.

The finance ministry lowered the yields on these eurobonds by about 32.5 (bps) for the six and 12 year-term bonds, and by about 12.5 (bps) for the 30-year-term bonds, according to Kojok.

Accordingly, the six year-term bond was issued with an interest rate of 5.8 percent, down from 6.1 percent, the 12 year-term bond issued with an interest rate of 7.3 percent, down from 7.6 percent, and the 30 year-term bond was issued with an interest rate of 8.7 percent, down from 8.8 percent at the beginning of the issuance.

Kojok elaborated that these interest rates are lower than the rates of the Eurobond issuance in May 2020, which recorded 5.4 percent for the four year-term bonds, 7.6 percent for the 12-year-term bonds, and 8.8 percent for the 30-year-term bonds.

He added that the May issuance managed to attract over 300 investors across the world; including US, EU, Asia, Middle East and Africa.

In February, Egypt sold $3.7 billion US-dollar-backed eurobonds at “significantly lower” interest rates than previous issuances.

The proceeds of that issuance were utilised to bridge the $8 billion financing gap in the fiscal year FY2020/2021, which ended in June 2021.

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