Egypt raises $3bn through bond tap

25 May 2017

New money raised through existing Eurobond is more than the amount indicated by Finance Minister

Egypt has launched a $3bn tap of its existing triple-tranche Eurobond, raising $1bn more in new funds than the previously indicated amount in second aggressive borrowing move this year.

Egypt started marketing the tap on 24 May with initial price thoughts of 5.60 per cent for $1.75bn trance maturing in January 2022 and 6.58 per cent and 8.15 per cent area for $1bn tranche maturing in 2027 and $1.25bn paper due in 2047, sources told MEED.

It raised $750m in new funds through notes due in 2022 at 5.45 per cent, $1b at 6.65 per cent and $1.25bn at 7.95 per cent. The orderbook for the deal swelled to $11bn. France’s BNP Paribas was the joint lead manager on the deal. The US’ Citi and JPMorgan and France’s Natixis are also working on the transaction.

Egypt’s Finance Minister Amr el-Garhy on 30 April said that the government intends to tap the international debt market to raise $1.5-$2bn through sovereign offering within weeks. His announced followed Egypt’s cabinet’s move in the third week of April, raising the limit of the maximum amount of dollar bonds the country could issue on international markets by $2bn. The ceiling of international dollar issuances to fixed income investors was raised from $5bn.

Cairo launched a triple-tranche bond to raise $4bn earlier in 2017. The bond was twice the size of the funding target given when it started investor meetings in mid-January.

The senior unsecured five-, 10- and 30-year bonds were issued under the Egypt’s global medium-term note programme. Egypt paid investors 6.125 per cent for $1.75bn note maturing on 31 January 2022. The $1bn 10-year tranche offered 7.5 per cent, while the 30-year $1.25bn issue offered 8.5 per cent interest.

Egypt’s Ministry of Finance is trying to secure additional funding in the wake of rising interest rates in the domestic debt market and boost its cash reserves.

The Central Bank of Egypt (CBE) has raised key lending and borrowing rates, the first such move since it aggressively hiked them by 300 points in early November, following the flotation the Egyptian pound. CBE increased both rates by approximately 200 basis points following a Monetary Policy committee (MPC) meeting on 22 May. Overnight deposit rate was increased to 16.75 per cent from 14.75 per cent, and the overnight lending rate to 17.75 from 15.75 per cent.

Egypt has been seeking to diversify its funding options and has mainly relied on loans and foreign grants, especially, from its oil-rich allies Saudi Arabia, The UAE and Kuwait in the GCC. The country has agreed a $12bn loan programme from the International Monetary Fund (IMF) to support plans for sweeping economic reforms. However, it still suffers from dollar shortage, which has affected its ability to import goods.

The government, earlier in April, also announced plans to issue a $1bn sukuk by the end of the current financial year, according to a Ministry for Public Treasury statement at the time.

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