Egypt Plans to Issue Sukuk in Early 2014

Egypt aims to issue a sukuk to international and domestic markets at the beginning of 2014, the country said in its new USD12bn euro medium term note programme.

The Arab nation, rated Caa1/CCC+/B, wants to use Islamic bonds as a diversification tool to broaden the investor base and has been “targeting financing infrastructure and development projects with sukuk issuances”, it said.

The remarks come just weeks after President Mohamed Mursi approved a law allowing the state to issue Islamic bonds.

The Egyptian parliament signed off on a sukuk law in March this year after more than a year of deliberations.

The deal was originally planned for November 2012 but was shelved as the law had not been established.

In addition, political and economic difficulties have seen spreads on the country’s outstanding debt widen significantly.

A 5.75% 2020 bond was trading at a bid yield of 5.7% in January this year; it is now trading at 7.8%, according to Tradeweb data.

“They probably need to get the IMF programme out of the way before they come to market. Though I think the level of [Egypt’s] ratings are a bit mean, they do need to do what the IMF is suggesting,” said Gabriel Sterne, an economist at Exotix, a brokerage.

The country is currently in talks with the IMF on a USD4.8bn loan; the fund wants Egypt to tackle the fiscal gap by introducing austerity measures.

QNB Capital and HSBC are joint lead arrangers and dealers.

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