Egypt Seizes on Bond Rally as It Borrows $3.75 Billion

CAIRO (Capital Markets in Africa) — Egypt raised $3.75 billion of bonds on Monday as it sought to take advantage of investors’ hunger for higher-yielding assets.

The North African nation issued securities due in five, 10 and 40 years, with respective yields of 3.875%, 5.875% and 7.5%. The initial price talk ranged from 4.25% on the shortest tranche to 7.875% on the longest one.

A wave of monetary stimulus and optimism that coronavirus vaccine rollouts will sustain a global economic recovery have emboldened investors to buy riskier debt, including in emerging markets. Egypt’s dollar bonds gained about 13% in the fourth quarter, more than twice the average return of emerging-market sovereign debt.

This week’s debt sale will help Egypt cover its financing needs of around $8 billion for the fiscal year ending in June, according to Cairo-based investment bank EFG Hermes. The pandemic has cut into the nation’s main sources of foreign currency, including Suez Canal receipts and tourism.

“It’s a good time for the issuance, considering the drop in yields over the past few months and the positive outlook for emerging markets this year,” said Mohamed Abu Basha, the head of macroeconomic research at EFG Hermes.

It was only the second time the country sold notes with a maturity of as long as 40 years, as it extends its liabilities and diversifies sources of funding. The nation’s debt is rated B by S&P Global Ratings, five levels below investment grade and the same as Ukraine and Ethiopia.

Read More: Set Back by Virus, Egypt Revives Debt Plans as Foreigners Return

Monday’s offering was the first since Egypt’s parliament approved borrowings of up to $7 billion in the current fiscal year. The most populous Arab nation raised $5 billion last year in its largest Eurobond issuance. It also sold the Middle East’s first sovereign green bonds and secured financing from the International Monetary Fund.

Egypt has been Africa’s most prolific Eurobond issuer in recent years.

There will probably be strong demand for Egypt’s bonds given the country’s “fiscal discipline,” Abu Basha said before the final terms were announced. “The economy is also gradually recovering in the absence of stringent lockdowns”.

Citigroup Inc., First Abu Dhabi Bank, Goldman Sachs International, HSBC Holdings Plc, JPMorgan Chase & Co., and Standard Chartered Plc arranged the sale.

Source: Bloomberg Business News