Egypt’s market regulator Oks $124.7mn short-term bond issuance – official

Egypt’s Financial Regulatory Authority (FRA) endorsed the first programme to offer short-term bonds worth 2 billion Egyptian pounds ($124.7 million) to a securities brokerage firm, allowing it to finance its activities, its chairman told Egypt Today on Tuesday.

This comes as the first application of the authority’s Board of Directors Resolution No. 172 for the year 2018, which put a regulatory framework for the rules for issuance of short-term debt instruments, Mohamed Omran added.

“The approval of offering short-term bonds is a qualitative step for the Egyptian capital market that increases the efficiency and depth of the market by providing various alternatives of financing tools, so that each party can choose the most appropriate financing tool in accordance with its financial policy,” Omran said.

FRA appreciates and supports the positive trend in the Egyptian capital market that seeks steady steps to issue bonds of all kinds to become an attractive market for that instrument of non-bank financing tools, he added.

The authority’s approval to issue a short-term securitisation bond programme in the amount of 2 billion pounds – alongside with Tuesday’s approval of a bond programme for a brokerage firm in the amount of 2 billion pounds – will exceed the volume of corporate bond issuance in Egypt, including securitisation bonds, to more than 18 billion pounds in 2019.

“The issuance of short-term bonds mainly aims to provide financing for the companies’ working capital, and in that context came the approval of the authority for the first issuance of the short-term bond program to finance the working capital of a brokerage firm, activating activate it in all areas of brokerage in securities, including financing margin purchases for securities,” Omran added.

The board’s decision for the year 2018 specified the companies and entities that may issue and offer short-term bonds to joint stock companies and partnerships limited by shares, and companies authorized by the authority to practice one of the non-bank financial activities – after the approval of the authority.

This is in addition to the banks subject to the supervision of the Central Bank of Egypt and on the condition of its approval.

“These also include international and regional financial institutions that are authorised to issue and offer debt securities in Egypt or can guarantee the obligations of the issuer of these securities under bilateral or international agreements in which Egypt is a party, including the European Bank for Reconstruction and Construction, the International Finance Corporation and other Arab and international institutions, and small and medium-sized companies according to their definition of the rules for listing and writing off securities in the Egyptian Stock Exchange issued by the Authority or the definition issued to it by the Central Bank of Egypt,” he added.

Last November, FRA approved a programme issuing short-term securitization bonds worth2 billion pounds, Omran added, referring that, as a part of this programme, FRA agreed to issue two short-term securitization bonds for Premium International for credit services.