‘The bond issue has replaced all existing debt in a way that has materially improved the company’s financial structure,’ says Salman Butt, head of investment banking for Citibank Egypt, which is arranging and underwriting the issue with Commercial International Bank (Egypt)and Banque Misr. ‘This bond issue is expected to be a forerunner of several sizeable refinancing bond issues in the Egyptian market.’

The bond has been split into fixed and floating-rate tranches, each with maturity of six and a half years. The first is worth £E 600 million ($129 million) and carries a fixed rate of 13 per cent. The second tranche, worth £E 400 million ($86 million), is priced at the Central Bank of Egypt rate plus 2 per cent. ‘Although they are marketed as one package, the combination of the fixed and floating-rate tranches affords investors some flexibility when trading begins in a few weeks’ time,’ says Butt. ‘We can see this becoming the benchmark for future bond issues.’

The local Orascom Construction Industries (OCI)and Switzerland’s Holcimare the principal shareholders in ECC, which produces 7 million tonnes a year (t/y) of cement from its Suez complex. The company recorded revenues of $99 million in the first half of 2002, with a net profit margin of more than 25 per cent.

Despite ECC’s relatively healthy turnover, the local cement market has had a rough ride in the past six months. The market price for locally-produced cement has fallen sharply, to about £E 120 ($26) a tonne from £E 190 ($41), as a result of declining demand and the start-up of new production capacity. Total output capacity in Egypt is now 31 million t/y, compared with domestic demand of only about 25 million t/y.