Cairo February 21 2023: Egypt started the sale of its first Islamic debt on Tuesday as the North African nation wrestles with a foreign-currency crunch.
The three-year dollar sukuk is expected to price on February 21, according to the term sheet seen by Bloomberg. It was offered at an initial yield of around 11.625%.
Egypt faces a $1.25 billion Eurobond repayment this month.
The wheat importer’s $400 billion economy has been exposed to the shockwaves of Russia’s invasion of Ukraine. Th nation is also facing its worst foreign-exchange shortage in years and has devalued its currency three times since March and sought aid from the International Monetary Fund.
Citigroup Inc, Credit Agricole SA, Emirates NBD Capital, First Abu Dhabi Bank PJSC, HSBC Holdings Plc and Abu Dhabi Islamic Bank PJSC are managing the transaction. Bloomberg had previously reported that the government is seeking to raise as much as $1.5 billion.
It’s the first time Egypt has turned to the international debt market since a $500 million private placement of its debut yen-denominated, or samurai, bonds in March 2022.
The IMF estimates Egypt’s external financing gap at around $17 billion and expects its program will help unlock about $14 billion more from international and regional partners. Egypt has about $39 billion in outstanding debt in dollars and euros, including $1.75 billion due this year and $3.3 billion next year, according to data compiled by Bloomberg.
Moody’s Investors Service has assigned a (P) B3 rating to Egypt’s proposed $5 billion sukuk program, which will be used to finance investment and development projects. It downgraded the nation’s sovereign credit rating deeper into junk territory earlier this month, warning it’ll take time to reduce its vulnerability to external risks.
