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Tuesday, 9 February 2021

One step closer to our first sovereign sukuk sale

The House of Representatives’ Economic Committee finalized today its amendments to the Sovereign Sukuk Act, which sets the framework by which Egypt will issue sovereign sukuks, according to Al Mal. Most of the amendments appear to be largely cosmetic — including referring to the special purpose vehicle (SPV) that will manage sukuk issuances and sets terms with bond holders as the sukuks as the “Sovereign Sukuk Company.” Others lay out regulations for the mechanisms and processes of the issuance. These include:

Sukuk terms and issuance process: The amendments set a term limit of 30 years on all sovereign sukuks that will be issued. They also set up an oversight committee that will assess how the sukuks are priced and where the funding will go.

The Sovereign Sukuk Company: This will now be classified as a joint stock company with an issued capital of EGP 10 mn. While it’s authorized capital is EGP 100 mn, the Prime Minister is authorized to raise that amount as required.

One step closer to issuing sukuks: The government plans roll out the sharia-compliant bonds, both in EGP and foreign currency, as soon as the bill is ratified, Finance Minister Mohamed Maait said last year, without specifying the size of the country’s inaugural sale. The act will now need to get a vote in the plenary session of the House before being sent to the President to sign the Act into law. The executive regulations for the bill are expected to be issued within three months after that.

And it will come not a moment too soon, as the bond markets have been good to us. As we noted this morning, Egypt sold USD 3.75 bn in USD-denominated eurobonds yesterday, with yields as low as 3.875% for the five-year bonds, 5.875% for 10-year bonds, and 7.5% for 40-year bonds. The USD 15 bn issuance was around 4x oversubscribed.

OTHER LEGISLATION NEWS- The House also approved amendments to the Traffic Act today that will impose new fees on private, and public-sector vehicles to help finance the new smart transport system, reports Masrawy. The fees will rise 6% per year from the first value and will be capped at a 200% increase. Fees worth noting include:

  • For privately-owned cars, fees range from EGP 60 to EGP 1k based on engine size, with larger engine sizes and liter capacities requiring higher fees.
  • Motorcycles are subject to a EGP 20 fee.
  • Private, public, and tour buses will be subject to an EGP 200 fee, while school buses will pay a EGP 50 fee.
  • Large trucks will pay a EGP 400 fee while trucks used to transport heavy equipment will be subject to a EGP 500 fee.

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