Cairo riots hit Egypt Petroleum loan deal

01 February 2011

State oil company delays $2bn loan deal

Egyptian General Petroleum Corporation (EGPC) has delayed choosing banks to manage a new $2bn five-year loan deal in a sign that protests against the rule of President Hosni Mubarak are disrupting the economy.

The state-owned oil firm had been due to pick banks for the deal by the end of January, but bankers who pitched for the mandate say they have been told not to expect a decision until calm has returned to Egypt.

“No bank would finance anything in Egypt at the moment, it would be completely foolish,” says a banker close to the deal.

Another banker says he has been told not to expect the deal to start moving again until some stability has returned to Egypt. “That could take a long time as I don’t see this situation quickly going away,” he says.

By 30 January, about 100 people had been killed and more than 2,000 wounded as anti-Mubarak protesters clashed with security forces.

The protests have caused widespread disruption in Egypt. The Central Bank of Egypt has ordered all banks to stay shut on 30 January, the stock market will also be closed. In addition the Egyptian pound has weakened, and ratings agency Fitch has put the country’s BB+ rating on negative outlook.

Mubarak has forced the resignation of the cabinet, and appointed intelligence chief Omar Suleiman as his vice-president and aviation minister Ahmed Shafiq as prime minister.

EGPC is looking to raise $2bn through pre-export finance, where banks provide loans to a company to finance exports to a buyer that is already in place.

The deal was launched in the first week of January, and banks were given until 17 January to respond to EGPC with bids for managing the loan. That was before protesters called for a ‘day of rage’ on 25 January that sparked the beginning of the rioting that continued until 30 January.

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