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Thursday, 23 February 2023

Egypt’s debut USD 1.5 bn sovereign sukuk issuance wraps 4x oversubscribed

Egypt closes USD 1.5 bn sukuk issuance: The Finance Ministry successfully closed its maiden sukuk issuance yesterday morning, it said in a statement.

The USD 1.5 bn issuance was c.4x oversubscribed, attracting an order book of USD 6.1 bn, the ministry said. This narrowed the final yield to 10.875% from an initial guidance price of 11.625%.

Who subscribed? Some 250 global investors subscribed to the sukuk, which attracted new investors to Egypt from markets including the Gulf and East Asia as well as the US and Europe, the ministry said. Investors included asset managers, pension funds, ins. and investment funds, and banks. The bonds will be traded in the secondary market on the London Stock Exchange (LSE).

More to come: The issuance is the first in a three-year, USD 5 bn sukuk program, the ministry said. Moody’s last week gave a (P) B3 rating to the USD 5 bn sukuk program, which will be used to finance investment and development projects.

Costly refinancing: The proceeds helped Egypt to fund the repayment of a USD 1.25 bn eurobond on Tuesday. Those bonds carried an interest rate of 5.577%, almost half the rate that the country will be paying on the sukuk.

BACKGROUND: Egypt has been unable to access fresh finance from the international capital market over the past year due to the knock-on effects of the war in Ukraine and tighter global financial conditions. The sukuk issuance is Egypt’s first international debt sale since last March.

More debt issuances in the pipeline? The sale could pave the way for more issuances this year as the government looks to finance upcoming debt repayments. The Finance Ministry had been planning to issue its maiden USD 500 mn CNY-denominated panda bond in China in 1Q 2023, and previously said it would issue USD 500 mn of sustainable development bonds before the end of the current fiscal year.

Advisors: Our friends at HSBC are acting as lead managers and bookrunners along with Citigroup, Credit Agricole, Emirates NBD Capital, First Abu Dhabi Bank and Abu Dhabi Islamic Bank. Adsero-Ragy Soliman and Partners and Clifford Chance provided legal advice to the Finance Ministry, and Zaki Hashem & Partners and Linklaters acted as counsel to the joint lead managers.

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