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Thursday, 19 May 2022

CIRA could be the first to tap the future flow securitization market

CIRA could issue Egypt’s first future flow securities: EGX-listed private sector education outfit CIRA is in talks with the Financial Regulatory Authority (FRA) to issue EGP 1.5 bn worth of future flow securities, a source with first-hand knowledge of the transaction told Enterprise yesterday. The securities will be backed by receivables from the company’s educational services. The company could take the issuance to market within four months, the source said, adding that talks remain at an early stage.

Advisors: EFG Hermes is financial advisor for the issuance, while Zulficar and Partners is acting as legal advisor.

Wait, what’s future flow securitization again? Future flow securitization differs from traditional securitization in that it allows the securitization of payments that aren’t yet on the company’s balance sheet, giving companies access to liquidity without needing a big portfolio of accounts receivables (think: home and car financing, leasing portfolios and the like). Future income — whether from club memberships, phone bills, utility payments, tuition fees or rents — is packaged into securities and offered to investors to raise capital. This gives public- and private-sector companies such as utilities providers, healthcare companies, telecom players, and education outfits a new way to access liquidity.

Contact Financial Holding is also in the running to be the first in the country to securitize future flows on behalf of “one of the largest corporate firms in Egypt,” CFO Ayman Elsawy told us earlier this year. The company is expected to issue the securities in 2H 2022, he said. Contact Financial (formerly Sarwa Capital) was also responsible for Palm Hills Developments’ maiden sukuk issuance earlier this year.

Background: Amendments to the Capital Markets Act that introduce future flow securitization were signed into law in March, after the FRA approved the instruments for use last May.

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