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Thursday, 28 July 2022

CIRA’s maiden future flow bond issuance could close next month

It’s official: CIRA’s future flow securitization program has gotten the nod from the Financial Regulatory Authority (FRA), which has given EFG Hermes the final go-ahead to take EGX-listed education provider CIRA’s planned EGP 800 mn issuance to market. The offering is Egypt’s first-ever future flow securitization, CIRA and the regulator said yesterday in separate statements here (pdf) and here (pdf). The first issuance should close before the end of August and will offer seven-year securities at EGP 100 each, CIRA CEO Mohamed El Kalla told Enterprise.

This is part of a EGP 2 bn securitization program which will take place over three years. The bonds will be backed by future tuition revenues. The FRA gave CIRA initial approval to begin regulatory procedures for the issuance in June.

SOUND SMART- 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. 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. 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.

WANT TO GO DEEPER? Check out our explainer on future flow securitization here.

Advisors: EFG Hermes is the financial advisor on the transaction, Zulficar & Partners is providing legal counsel, and PwC is the auditor. MERIS is providing the credit rating, El Kalla said.

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