Egypt Basks in `Unprecedented' Demand After $4 Billion Bond Deal

21 Feb 2019, 01:16 AM IST

(Bloomberg) -- Egypt raised $4 billion from the dollar debt market in the strongest signal yet that investor interest has returned.

The government sold debt in tranches maturing in five, 10 and 30 years, with its offering covered more than five times. While the debt was priced at a higher yield than a similar deal last year, the Finance Ministry described the interest in its latest issuance as “unprecedented” for Egypt.

The Arab world’s most populous nation is joining a rush from governments in developing nations including Saudi Arabia and Turkey amid a pause in U.S. interest-rate hikes and a sudden influx of cash into emerging-market bond funds. Egypt is also taking advantage of improving sentiment after the International Monetary Fund this month approved the release of the fifth part of the nation’s $12 billion loan.

“Egypt is an improving credit story,” said Mohammed Elmi, an emerging-market portfolio manager at Federated Investors U.K. in London. “The fiscal adjustment has been on track under the IMF program, the current-account deficit has narrowed sharply, and growth dynamics are strong.”

Egypt, which sold more than $9 billion last year in euro and dollar-denominated bonds, secured assistance from the IMF in 2016 after devaluing the pound and cutting subsidies as part of a sweeping program to overhaul the economy. Growth has steadily rebounded, with the government targeting a gain of 5.6 percent in gross domestic product for the fiscal year ending in June.

The deal’s results are as follows:

$750 million in five-year bonds: 6.2%
$1.75 billion in 10-year bonds: 7.6%
$1.5 billion in 30-year bonds: 8.7%
The Finance Ministry said it received offers from 250 investors, 37% of whom were from North America, 46% from Europe, and the rest from North Africa, the Middle East, and Asia

The Finance Ministry said it had to close the books mid-way through the process thanks to strong demand by a broad swath of investors, whose total bids reached $21.5 billion. This reaffirms “the international community’s confidence in the ongoing reform efforts that are fully and consistently supported by the political leadership,” Finance Minister Mohamed Maait said in a statement Wednesday.

The sovereign is the first from Africa to tap the Eurobond market in 2019 after a record $30 billion was raised last year, according to data compiled by Bloomberg. Egypt’s government has raised its assessment of the amount it needs to service external debt this year to $16.9 billion.

To contact the reporters on this story: Lyubov Pronina in Brussels at lpronina@bloomberg.net;Tarek El-Tablawy in Cairo at teltablawy@bloomberg.net

To contact the editors responsible for this story: Hannah Benjamin at hbenjamin1@bloomberg.net, Paul Abelsky, Amy Teibel