Egypt succeeds in issuing first sovereign sukuk 4 times oversubscribed

Yield dropped over 0.6 percentage points
Egypt succeeds in issuing first sovereign sukuk 4 times oversubscribed

The Ministry of Finance in Egypt announced on Wednesday the sale of sovereign sukuk, the first in its history, worth $1.5 billion over a period of 3 years, with the coverage ratio exceeding 4 times. The yield subsequently dropped more than 0.6 percentage points from 11.625 percent to 11 percent.

Egyptian Finance Minister Mohamed Maait said in a statement, “We have succeeded in offering the first issue of sovereign Islamic sukuk in the history of Egypt, worth $1.5 billion, where the value of the subscription amounted to about $6.1 billion, which means covering the subscription target more than four times.”

He explained that the cost of the issue was less than the required yield on bonds in the international secondary markets by more than 70 points, as the coupon price on the issue was reduced by about 75 basis points compared to the opening prices announced at the beginning of the offering process at the level of 11.625 percent, closing the issued coupon at 10.875 percent.

The minister added that this issue witnessed a remarkable turnout and more than 250 investors in various international capital markets submitted purchase orders, pointing out that this issuance attracted a new base of investors in the Gulf countries and East Asia, as well as European countries and the United States. This was In addition to the quality of investors witnessed by the offering, represented by asset managers, pension funds, insurance funds, investment, and banks, who are distinguished by their retention of investments in the long term, creating a positive impact on minimizing price fluctuations.

Read: For the first time. Egypt issues $1.5 bln sovereign sukuk

He stressed that “our success in offering the first issue of sovereign Islamic sukuk in the history of Egypt comes in light of turbulent global economic and political conditions, and the high cost of financing as a result of a sharp inflationary wave, in a way that sends a strong message of confidence from global financial markets, investors in the Egyptian economy and its future, and its ability to deal flexibly with internal and external challenges.”

Deputy Minister for Fiscal Policies Ahmed Kouchouk said: “We are pleased to join the group of sovereign sukuk issuers and appreciate the great demand from investors for this successful issuance, which demonstrates their support and confidence in the government’s efforts to diversify funding sources.”

He added that Egypt has prepared for this offering by issuing the Sovereign Sukuk Law and its executive regulations to provide the necessary legislative umbrella to develop a new type of government securities that comply with the principles of Islamic Sharia, in cooperation with leading banks in the field of Islamic finance and sukuk issuances, and the use of local and international law firms, to cover all technical, legal and marketing aspects in accordance with international practices in line with the principles of Islamic Sharia.

Mohamed Hegazy, head of the Public Debt Management Unit at the Ministry of Finance, explained that one of the most important provisions of the law and its executive regulations is that the assets are privately owned by the state, while the Egyptian Financial Company for Sovereign Settlement, an Egyptian joint stock company wholly owned by the Ministry of Finance, supervises these assets. It also included directing the proceeds of the issuance to investment and development projects included in the economic plan of the state’s general budget.

Hegazy pointed out that the importance of sovereign sukuk is due to the fact that they are new alternatives to provide the necessary financing for investment and development projects included in the economic plan of the state’s general budget in a manner consistent with the state’s efforts to enhance aspects of spending to improve the standard of living of citizens, and it also helps attract a new segment of Arab and foreign investors, especially from the Gulf and Asian countries, who prefer financial transactions compatible with the principles of Islamic Sharia, which helps increase local and international foreign cash flows.

He pointed out that the Ministry of Finance has succeeded in establishing an international program for sovereign sukuk issuances for several years, worth $5 billion, which was registered on the London Stock Exchange on February 14, 2023, in accordance with international bond issuances, being the first issuance of sovereign Islamic sukuk in Egypt.

Egypt learned that the remaining issues, worth %3.5 billion out of $5 billion, will be offered over an average of three years.

For more on Egypt, click here.

The stories on our website are intended for informational purposes only. Those with finance, investment, tax or legal content are not to be taken as financial advice or recommendation. Refer to our full disclaimer policy here.