Egypt looked to raise $1.5 billion through the sale of its first Islamic debt, as the North African nation wrestles with a foreign-currency crunch.
The wheat importer’s $400 billion economy is exposed to the shockwaves of Russia’s invasion of Ukraine. It has devalued its currency three times since March and sought aid from the International Monetary Fund.
The final guidance price for the three-year dollar sukuk was at 11.125% area (+/- 1/8th) on Tuesday, according to a term sheet seen by Bloomberg. It had been offered at an initial yield of about 11.625%, with the lower pricing coming after it attracted an order book of over $5.8 billion, excluding joint lead manager interest, as per the term sheet.
It comes ahead of a $1.25 billion Eurobond repayment due Tuesday.
- More: IPT: Egypt 144A/RegS 3-Year USD Sukuk at 11.625% Area
The sukuk offering is the first time Egypt has turned to the international debt market since a $500 million private placement of its debut yen-denominated, or samurai, bonds in March 2022.
Egypt needs to offer a minimum spread of 725 basis points over three-year Treasuries to attract strong demand for its sukuk offering, Mashreq Bank’s rates and fixed income team in Dubai wrote in a note. That’s in line with the initial yield for the Islamic security being offered by the country.
How to Know Where Egypt’s Once-in-Decade Crisis Is Heading
The IMF estimates Egypt’s external financing gap at around $17 billion and expects its program will help unlock about $14 billion more from international and regional partners. Egypt has about $39 billion in outstanding debt in dollars and euros, including $1.75 billion due this year and $3.3 billion next year, according to data compiled by Bloomberg.
Moody’s Investors Service has assigned a (P) B3 rating to Egypt’s proposed $5 billion sukuk program, which will be used to finance investment and development projects. It downgraded the nation’s sovereign credit rating deeper into junk territory earlier this month, warning it’ll take time to reduce its vulnerability to external risks.
Citigroup Inc, Credit Agricole SA, Emirates NBD Capital, First Abu Dhabi Bank PJSC, HSBC Holdings Plc and Abu Dhabi Islamic Bank PJSC are managing the transaction.
--With assistance from Netty Ismail.
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