Egypt seeks guarantees for potential Samurai bonds
The Madbouly government wants our first Samurai bond issuance to be fully guaranteed by the Japan International Cooperation Agency (JICA) to ensure strong investor participation, Al Arabiya reported on Thursday, citing sources it says has knowledge of the matter. Officials are currently discussing the matter with the agency, which has “shown flexibility,” according to the sources, who added that no final agreement had yet been reached.
Egypt aims to sell around USD 500 mn of JPY-denominated bonds in Japan by the end of June as part of its debt diversification strategy, Finance Minister Mohamed Maait said last month. “The bond issuance will be in JPY, but the transfer currency can be in JPY or USD,” Maait said.
Asian investors expect to see an Asian rating agency in play? Officials are in talks with Japanese government financial institutions over to concerns that investors may hesitate to put money in Egyptian bonds over credit ratings, the unidentified sources reportedly told Al Arabiya. While Egypt’s sovereign credit rating generally has a stable outlook from the top three rating agencies (S&P Global, Moody’s, and Fitch), Asian markets do not usually rely on them to assess bonds. Marketing foreign bonds in Asia is a different ball game and requires new ratings assessments by Asian agencies.
Background: The government had been mulling selling JPY-denominated bonds back in 2019, but Maait said in late 2020 that the planned sales were being pushed until at least FY2021-2022 because of complications caused by the pandemic. Samurai bonds are issued in Tokyo by non-Japanese companies to access Japan’s financial market.