Egypt capitalises on bond boom with $3bn borrowing plan

Egypt will raise $3 billion by selling dollar bonds maturing in as long as 40 years as it seeks to take advantage of low borrowing costs and investors’ hunger for returns.

The North African nation launched securities due in five, 10 and 40 years paying yields of 3.875%, 5.875% and 7.5% respectively, according to people familiar with the matter, who aren’t authorized to speak publicly and asked not to be identified. The initial price talk ranged from 4.25% to 7.875%.

The bonds are expected to price today. Officials from the Finance Ministry declined to comment.

A wave of monetary stimulus and optimism that coronavirus vaccine rollouts will sustain a global economic recovery have emboldened investors to hunt for returns in riskier assets. Egypt’s dollar bonds gained about 13% in the fourth quarter, more than twice the average return of emerging-market sovereign debt.

The debt sale will help Egypt cover its financing needs of around $8 billion for the fiscal year ending in June, according to Cairo-based investment bank EFG Hermes. The coronavirus pandemic has cut into the nation’s main sources of foreign currency, including Suez Canal receipts and tourism.

“It’s a good time for the issuance, considering the drop in yields over the past few months and the positive outlook for emerging markets this year,” said Mohamed Abu Basha, the head of macroeconomic research at EFG Hermes.

The country is selling 40-year notes for the second time as it seeks to ease the cost of borrowing by extending its debt maturities and diversifying the sources of funding. The nation’s debt is rated B, five levels below investment grade, by S&P Global Ratings.

Read More: Set Back by Virus, Egypt Revives Debt Plans as Foreigners Return

Monday’s offering is the first since Egypt’s parliament approved borrowings of up to $7 billion in the current fiscal year. The most populous Arab nation raised $5 billion last year in its largest Eurobond issuance. It also sold the Middle East’s first sovereign green bonds and secured financing from the International Monetary Fund.

There will probably be strong demand for Egypt’s bonds given the country’s “fiscal discipline,” Abu Basha said. “The economy is also gradually recovering in the absence of stringent lockdowns”.

Citigroup Inc., First Abu Dhabi Bank, Goldman Sachs International, HSBC Holdings Plc, JPMorgan Chase & Co., and Standard Chartered Plc are arranging the sale.