Sunday, 27 June 2021

Egypt’s first local green bond sale approaches

The first local green bonds sale could go ahead in as little as two to three weeks, Financial Regulatory Authority Deputy Chairman Islam Azzam was quoted as saying by Al Mal, though he did not name the issuer. The USD 100 mn sale — expected to be the country’s first green bond issuance since the USD 750 mn sale by the government last year — is still pending “a few final procedures,” Azzam said, without giving further details. We reached out to Azzam and other FRA representatives, but none of them were available to comment as of dispatch time.

As far as we know, Egypt’s largest private sector bank CIB is the only party with a green bond issuance in its pipeline. The sale was previously expected to take place in October 2020, back when the bank’s head of debt capital markets Heba Abdellatif told us that due diligence was in its final stages. CIB was previously courting the International Finance Corporation (IFC) for the inaugural sale. The IFC was looking to invest USD 65 mn in the first tranche of what were said to be five-year bonds, and potentially planned to bring its investment up to USD 100 mn in another tranche. CIB declined to comment on Azzam’s statements.

Egypt’s last green bond issuance was well-received by the market: The Finance Ministry took the country’s maiden USD 750 mn sovereign green bonds to market last September. The issuance was almost 5x oversubscribed, attracting some USD 3.7 bn worth of orders. Minister Mohamed Maait said this month that a second issuance is in the cards during the state’s upcoming fiscal year, which starts on 1 July, but that the matter was not yet settled.

What are green bonds? A green bond is a type of fixed-income instrument that is specifically earmarked to raise money for climate and environmental projects. The World Bank was the first organization to offer green bonds in 2008 and has since issued over USD 13 bn worth through more than 150 transactions in 20 currencies. Green bonds were introduced following changes in 2018 to the Capital Markets Act which also opened the door for other new financial instruments including Islamic sukuk, short selling, and a futures and commodities exchange.

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