Egypt Says to Launch Zero-coupon Bonds Before End of Q1-13/14

Egypt will be auctioning EGP 1 billion Egyptian pounds ($143 million) in 18-month zero-coupon bonds before the end of the first quarter of the current fiscal year, the country’s finance ministry said in a statement. This comes after the ministry has announced that it would postpone offering its 18-month zero-coupon bonds due to technical issues.

Accordingly, the notes will be issued before the end of Q1 of the FY2013/14 with a settlement date of T+1. They will be redeemed with a yield attached to their par value in a single payment at their March 10, 2015, maturity, the statement said.

The ministry further added that the zero-coupon bond issuance is part of a plan to diversify financing sources and expand investor base.

A zero-coupon bond (also called a discount bond or deep discount bond) is a bond bought at a price lower than its face value, with the face value repaid at the time of maturity. It does not make periodic interest payments, or have so-called “coupons”, hence the term zero-coupon bond. When the bond reaches maturity, its investor receives its par (or face) value.

18-Month Zero Coupon Notes Fact Sheet

Issuer: Ministry of Finance

– Security Type: Zero Coupon Bonds

– Issue Size: EGP 1 billion

– Maturity: 18 month (3 coupons periods, i.e. 182×3= 546)

– Central Depositary: Misr for Central Clearing, Depositary and

Registry (MCDR)

– Issue Date: September 10th, 2013

– Maturity Date: March 10th, 2015

– Denomination: EGP 1000

– Minimum Bid: EGP 1000

– Bidding Style: Price basis (similar to current T-Bills auctions)

– Coupon Frequency: None

– Calculation Methodology: Discount Price Methodology

– Days convention: Act/ 365 days

– Auction Type: Multiple price auction (American Style)

– Submission of bids: Trough the eligible Primary Dealers.

– Settlement Date: T+1 for both primary and secondary market

– Settlement Price: Percent of the face value extended to the fifth decimal for both primary and secondary market.

– Redemption: Yield added to Par Value, single payment on maturity.

– Secondary Market: OTC, through Primary Dealers System.

– Liquidity Ratio: Will be included in the numerator.

– Tax Status: 20% withholding Tax (similar to current Treasury securities).

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