CAIRO: In a step that further allows foreign investors to gain exposure into the Egyptian market, Minister of Finance Youssef Botrous Ghali unveiled plans to increase issuance of Egypt’s five-year bond before the end of this year.
Tracking a positive tone in Egyptian bonds, Egypt sold Thursday $1.05 billion worth of a five-year global bond denominated in local currency and payable in dollars.
The Eurobond, trading in international markets, offered investors a yield of 8.875 percent, in the low range of the initial price guidance provided by banks leading the deal, namely Citigroup and JP Morgan.
The Ministry of Finance priced the 8.75 percent coupon bond at LE 99.504 and announced the bond issue was covered at 2.3 times its value.
According to HC-Securities brokerage firm, those bonds – despite being denominated in local currency – are more accessible to international investors than their local counterparts because they are payable in American dollars and thus can help investors avoid volatility of foreign exchange rates.
“The bonds are performing quite well on the market. On the first trading day, prices soared to LE 1.25 per bond which is a very good rate, said a Eurobond trader at HC.
Indeed, initial forecasts reveal the bonds will appeal to various international investors, marking a tremendous success on these international markets.
“Investors are always looking for good quality paper in emerging markets, and these bonds will be in demand given improving economic fundamentals such as economic growth, foreign direct investments (FDI) as well as domestic demand for investment, said Angus Blair, head of research at Beltone Financial.
“These bonds are a benchmark for Egypt. This is a test to see [how far] demand and price can go, Blair pointed out. “Issuance of these bonds will further increase, and the government will have more offerings in the future.
Egypt’s Eurobond, which will mature on July 18, 2012, is rated at “BB+ – again reflecting the country s progress on structural reform as well as improved economic and fiscal management.
To record better ratings, Blair explained that the government needed to invite more broadly based economic growth, more FDIs stimulating growth, and more private sector engagement.
The ministry has not yet divulged in which sectors proceeds from the bonds will be used, however, speculations circle around raising more government expenditure.
