Egypt’s borrowing costs rise in bond sale

Egypt’s borrowing costs increased as it raised $4 billion (Dh14.68 billion) from its first sale of international bonds since a currency devaluation in November, a person familiar with the deal said.

Africa’s third-biggest economy issued $1 billion of 10 year notes at 7.5 per cent, said the person, who asked not to be identified because the information is not public yet. That compares with a coupon of 5.875 per cent for similar-maturity bonds in 2015. The government also sold $1.75 billion of five-year notes at a yield of 6.125 per cent and $1.25 billion of 30-year securities at 8.5 per cent Tuesday, according to the person.

Currency float

Egypt floated its currency in November, slashing its value by half, in a bid to attract foreign investment and stimulate an economy that has suffered from shrinking business activity for 15 months. The country signed a $12 billion International Monetary Fund loan in November, the biggest ever for a Middle Eastern nation, and needs to bridge a financing gap that the IMF estimates at $35 billion for the next three years.

The bonds were “fairly generously priced compared to existing securities and to other similarly rated sovereigns like Pakistan and Sri Lanka,” Abdul Kadir Hussain, the head of fixed-income asset management at Arqaam Capital Ltd. in Dubai, said. The sale “should alleviate short-term pressures on the currency, although Egypt will have to continue stabilising and growing its domestic economy.”

BNP Paribas SA, Citigroup Inc., JPMorgan Chase & Co. and Natixis SA arranged the sale.

- Bloomberg