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Thursday, 31 October 2019

Egypt selects five international banks to promote USD-denominated Eurobond issuance

Egypt selects advisors for USD-denominated bond issuance this FY: Egypt has selected five international banks to advise on an upcoming USD-denominated bond issuance on the Luxembourg Stock Exchange, the Finance Ministry said, naming Citibank, JPMorgan, BNP Paribas, Natixis and Standard Chartered. Meanwhile, Al Tamimi & Company was selected as local legal advisor, while Dechert was selected as international counsel. The offering would be made sometime in FY2019-2020, the ministry said in a statement yesterday, but did not specify a date or the expected value of the issuance.The Finance Ministry signalled last month that it will offer USD 2.5-3 bn in eurobonds either at the end of this year or the beginning of 2020, after it tapped 20 international investment banks and 7-8 local and international law firms to advise on the offering.

Thank you, Fed: It appears that the US Federal Reserve’s rate cuts may have encouraged the Finance Ministry to proceed with plans for borrowing. The ministry said it wants to make best use of the “improving emerging market conditions” and the low interest rates on Egyptian debt instruments in the secondary market amid continued strong demand on Egyptian bonds. The Federal Reserve has cut its benchmark rates by 75 bps over the past three months.

Egypt’s 30-year USD-denominated bonds dipped earlier this month pressured by investors seeking to cut their holdings in the secondary market to absorb a possible new bond sale, marking its biggest daily fall since protests last month. The 2047 bond fell USD 0.003 to USD 1.04, its lowest in almost two months. “There’s been some noise about a new [USD] bond issuance coming out of Egypt soon and, given the heavy investor positioning, we might expect some selling as investors make space in their portfolios to purchase the new issue in the primary market,” said Farouk Soussa, senior Middle East and North Africa economist at Goldman Sachs.

Background: The ministry received cabinet approval to issue USD 5 bn-worth of eurobonds this fiscal year. The government, which earlier this year raised the limit of its eurobond program to USD 30 bn from USD 20 bn, last issued eurobonds in April when it sold EUR 1.25 bn in 12-year bonds at a 6.375% yield and EUR 750 mn in six-year bonds at a 4.75% yield.

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