Egyptian Borrowers Face Challenges Raising Syndicated Loans

Egypt’s return to the international syndicated loan market is being hampered by September’s global volatility and the growing liquidity crunch in the Middle East, which is pushing loan pricing higher, banking sources said on Friday.

Two loans for Egyptian banks that were launched before September are still in the market as lenders seek higher pricing to compensate for perceived increased risk.

Egypt’s second-largest state-bank, Banque Misr, has been talking to banks since June about a three year US$250m deal which is being coordinated by Bahrain’s ABC Bank and has not yet signed.

Banque du Caire has also has been in talks since July about a one-year US$200m deal which is being coordinated by Standard Chartered.

Banque Misr and Banque du Caire were not immediately available for comment.

Egypt re-entered the international syndicated loan market in January this year with a 42 month US$1.3bn pre-export loan for Egyptian General Petroleum Group.

The country took a four-year break from the international loan market after the Arab Spring uprisings in 2011. A handful of Egyptian corporates and banks have tapped the market this year, but those benchmarks are now being revised.

“Egypt has effectively been off the radar for several years. It is now an emerging market, benchmarks need to be established and borrowers need some hand-holding,” a banker said.

Deals that have been completed, which include a 37-month US$390m deal for National Bank of Egypt, have largely been funded by Middle Eastern banks.

With low oil prices squeezing Middle East liquidity, negotiations with Egyptian borrowers have become tougher as lenders call for higher pricing.

“Egypt remains a very challenging place, not least because hopes of getting things done are pinned on Middle East liquidity,” a second banker said.

MAKING PROGRESS
Banque Misr is expected to be the first Egyptian bank to complete a deal since September’s volatility. Talks stalled over pricing, but bankers said that some progress has been made in recent weeks and the deal is now likely to get done.

“They (Banque Misr) wanted the same pricing as National Bank of Egypt,” a third banker said, adding that Bank of Egypt paid all-in pricing of 300bp for its loan.

Banque du Caire is still in protracted discussions with lenders over the terms of its deal, bankers said. These problems have been exacerbated by Egyptian borrowers’ previous absence from the loan market.

“Discussions with the borrower are very difficult, more difficult than the actual syndication,” a fourth banker said.

Although Egypt is proving challenging, bankers say they will still consider short-term loans for financial institutions in hard currency, but longer-dated, local currency loans are off the menu for now.

“The positive vibes around Egypt in the first quarter may have dissipated but lenders still believe it is an important market. There might be a slow down but it is not the end yet,” said the fourth banker.