Egypt sold USD 3.75 bn in USD-denominated eurobonds yesterday at “significantly lower” yields than recent issuances, Reuters reports, citing a document from one of the banks working on the debt sale. Press reports had emerged last year suggesting that Egypt was planning a USD 3-4 bn EUR- or USD-denominated eurobond sale in 1Q2021, which Finance Minister Mohamed Maait denied at the time, saying the ministry was not actively working towards an issuance.

The sale saw Egypt receive some USD 15 bn in orders, making the issuance around 4x oversubscribed. The bulk of the demand was for long-term notes, the document shows, according to Reuters. The proceeds will be used to partially cover a USD 8 bn financing gap for FY2020-2021, Bloomberg reports, citing EFG Hermes. The state budget, approved by the House of Representatives, gives the Finance Ministry the license to borrow up to USD 7 bn through debt instruments in the international market.

About the issuance: The three-tranche issuance included USD 750 mn in five-year bonds at a yield of 3.875%, USD 1.5 bn in 10-year bonds at 5.875%, and another USD 1.5 bn in 40-year bonds at 7.5%. The initial price guidance was higher for all three tranches, showing that “the risk premium has dropped considerably,” Naeem Brokerage’s Allen Sandeep told the newswire.

Timing is right: “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,” EFG’s Mohamed Abu Basha told Bloomberg. Speaking ahead of the sale, he expected the issuance would be met with strong demand.

This was the first eurobond sale in the current fiscal year, and the second time Egypt has sold 40-year bonds, which were last featured in the USD 2 bn eurobond sale in 2019. The 40-year notes are part of Egypt’s plan to diversify its sources of funding and ease fiscal pressure by shifting to longer-term debt.

Egypt has had a good run: The government took a record USD 5 bn eurobond issuance to market last May, which was 4.4x oversubscribed, and made its first sovereign green bond issuance worth USD 750 mn last September, attracting more than USD 3.7 bn of orders for the climate friendly securities.

Advisors: Citigroup, First Abu Dhabi Bank, Goldman Sachs, HSBC, JPMorgan Chase & Co., and Standard Chartered arranged and managed the sale.