BY: Ahmad Abu el-Hamd
CAIRO – Egypt will sell $4 billion of Eurobonds in three tranches, raising twice as much as targeted when it began a roadshow last week, and at lower yields than initially expected, bankers involved in the deal said on Tuesday.
Bankers said the issue was likely to comprise $1.75 billion of five-year bonds yielding 6.125 percent, $1 billion of 10-year bonds paying a yield of 7.50 percent and $1.25 billion of 30-year bonds yielding 8.50 percent.
Initial marketing had pointed to yields of 6.375-6.625 percent, 7.625-7.875 percent, and 8.625-8.875 percent respectively. The tighter pricing is a vote of confidence from foreign investors the country has sought to lure back following a 2011 uprising that drove them away. “The yields are much better than expected. The expected yields for the five-year was at 6.5 and now it’s at 6.125, so that’s great news,” one banker said.
The combined order books for the bonds exceeded $13.5 billion incorporating the start of sales on the U.S. market, bankers said, although Egypt is not expected to accept this amount.
“The issuance is successful because it offers relatively attractive yields compared to global returns on the dollar at a time when the macro risks related to the Egyptian economy are diminishing and the turnaround story is about to commence,” said Cairo-based CI Capital economist Hany Farahat.
The country of over 90 million has been seeking a variety of funding sources, from development loans to foreign grants and aid, to plug its financing needs as it struggles with an acute dollar shortage that has hampered its ability to import.
Egypt’s dramatic decision to float its currency in November, roughly halving it in value overnight, along with a three-year $12 billion IMF programme attached to sweeping reforms have been widely praised by economists and investors long-hesitant to re-enter its dollar-starved economy.
The IMF deal and flotation have helped propel the Egyptian stock market to multi-year highs in recent days.
“I expect this successful issue to induce some follow-up issuances in the coming fiscal year, to capitalise on Eurobond proceeds as a main source of FX inflows,” Farahat said.
The bonds will be listed on the Luxembourg Stock Exchange. The offering is being run by BNP Paribas, Citigroup, JP Morgan and Natixis.
Egypt had planned to begin its roadshow in November but postponed it due to market volatility.
