Emirates NBD arranges Egypt’s $1.5bn sukuk

Dubai’s Emirates NBD has successfully priced Egypt’s $1.5bn debut sukuk, which was oversubscribed four times, with the order book fetching more than $6bn.

The three-year sukuk, which was issued by the finance ministry through the Egyptian Financial Company for Sovereign Taskeek, received strong demand from a regional Shari’ah-compliant investor base, with 59 per cent allocation to the MENA region.

Emirates NBD said the Islamic bonds also received significant appetite from global emerging market investors leading to a 62.5 basis points compression from the initial guidance of around 11.625 per cent target to the final reoffer yield of 11 per cent.

Emirates NBD and other banks involved

Emirates NBD jointly managed the transaction with Abu Dhabi Islamic Bank, Citi, Credit Agricole, First Abu Dhabi Bank and HSBC, underscoring its commitment to supporting Egypt’s efforts to diversify its sources of funding.

Emirates NBD led two syndicated financing transactions for Egypt in the past, a $2bn financing facility in July 2020 and another $3bn in November 2021—the country’s largest global syndicated term loan facility to date.

“The well-received sukuk represents the third financing transaction we have conducted for the Government of Egypt, a strong vote of confidence in the Group’s ability to meet the needs of our clients through innovative products and services,” said Ahmed Al Qassim, group head of Wholesale Banking at Emirates NBD said in a statement.

The sukuk will be listed on the London Stock Exchange and the Egyptian government will reportedly use the proceeds to repay $1.25bn in five-year Eurobonds, which carried a fixed interest rate of 5.577 per cent and matured on 21 February.

Egypt, just like most emerging market economies, has seen its borrowing costs jump dramatically after global central banks led by the US Federal Reserve hiked interest rates to bring down inflation to sustainable levels.

S&P Global projected that global sukuk issuance will plunge further in 2023 to reach $150bn after the sukuk issuance slipped to $155.8 bn last year compared to $170.4bn that was raised in 2021.

Economic woes

Egypt is grappling with its worst foreign-currency crunch in years as the confluence of a geopolitical crisis in Europe, soaring commodity prices and a slowing global economy fueled the North African country’s inflation to record highs.

Latest data from state-run Central Agency for Mobilization and Statistics show that the country’s annual inflation stood at 26.5 per cent in January, up from 21.9 per cent in December as its economy contends with a foreign currency shortage. Earlier in February, the Egyptian government unveiled plans to sell stakes in several state-run companies to raise cash.

The country agreed on a $3bn bail-out package with the International Monetary Fund (IMF) last December to ease the economic crisis. The IMF deal was struck in exchange for Egypt implementing a number of economic reforms, including a shift to a flexible exchange rate. The deal is expected to catalyse additional financing of as much as $14bn from Egypt’s international and regional partners, including new financing from GCC countries.

Egypt has received pledges of more than $20 billion in deposits and investments from its Gulf allies—the UAE, Saudi Arabia and Qatar.

In August 2022, Saudi Arabia’s sovereign wealth fund announced that it was starting a company that will invest in swathes of Egypt’s economy from infrastructure and real estate to pharmaceuticals.

Read: Saudi wealth fund starts company for Egypt investments

Saudi Arabia had also pledged $15bn to support Egypt, whose economy has come under pressure this year due the the crisis in Ukraine.