Egypt expects its debt to become ‘euroclearable’ in October -minister

Author: 
Reuters
ID: 
1555247315314255400
Sun, 2019-04-14 12:48

CAIRO: Egypt has signed an agreement with Euroclear, Europe’s
biggest settlement house for securities, to allow holders of its
sovereign debt to clear transactions outside the country beginning
in six months’ time, its finance minister said.
Mohamed Maait also told Reuters that Egypt hopes to announce a new
sovereign debt issue by the end of September and hopes it will be
eligible for clearing via Belgium-based Euroclear.
“Hopefully by October this year, we will be starting to launch
the first part of our debt, (making it) euroclearable,” Maait
said in a phone interview late on Saturday.
The government is considering issuing “green bonds, samurai,
panda, sukuk and infrastructure bonds,” he said.
Maait was speaking from Washington, where treasury officials from
around the world have gathered for the spring meetings of the World
Bank and International Monetary Fund.
Euroclear is due to officially announce its memorandum of
understanding (MoU) with Egypt on Monday, a source familiar with
the matter said.
Euroclearability is seen as one of the last stages of capital
market development and can sharply lower borrowing costs for
emerging market economies, says PwC.
The deal will help “create the right market conditions for local
currency sovereign debt issuance,” according to a draft Euroclear
press release, seen by Reuters and due to be published on
Monday.
“The intention is for the market to eventually become
Euroclearable, creating a cross-border link to enable international
investment in Egyptian domestic debt instruments,” the release
said.
Settling debt via Euroclear requires high levels of transparency as
well as specifics on the size and structure of the debt to be
issued, among other aspects under Euroclear rules.
In February Egypt sold $4 billion in dollar-denominated eurobonds
and this month it issued 2 billion euros ($2.3 billion) in
euro-denominated bonds.
Maait also said in the interview that Egypt plans to sell stakes in
at least another five or six state-owned enterprises (SOEs) by the
end of June 2020.
It plans to use the proceeds from stake sales to help boost public
finances as part of a three-year economic reform program agreed
with the IMF in late 2016. Egypt received a $12 billion loan from
the IMF.
The government sold 4.5 percent of Eastern Company, Egypt’s
monopoly cigarette maker, in March, its first sale of state-owned
shares on the stock exchange in 10 years.
The sale had been planned for last year, but was delayed after
prices of emerging market assets plunged across the globe.
“We are on track. We may say something before June 2019, but
definitely, God willing, we will say more with the new financial
year,” Maait said on the SOEs. Egypt’s financial year begins in
July.
He declined to say which company would be offered next because
“it hurts us when we announce early.”
Maait said Egypt has put a mechanism in place for hedging against
fluctuating oil prices, a move aimed at helping avoid shocks to the
budget.
“Egypt is ready and Egypt is using the hedging mechanism whenever
Egypt needs to use it,” he said.
A plan for hedging against wheat prices that was under discussion
with banks in October “didn’t materialize,” but remains “on
the table” and is being explored, he said.
Euroclear’s global head of capital markets and fund services,
Stephan Pouyat, told Reuters that Euroclear’s agreement with
Egypt would be expanded in future.
“We are not just going to do the government bonds. We will start
by that, because that’s what international investors need,”
Pouyat said.
He said Euroclear wants to “make it clear (to investors) that
(Egypt) has a successful, long yield curve to create the benchmark
that is necessary for the corporate sector … and that is going to
facilitate significantly any sort of hedging.”
($1 = 0.8849 euros)

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Source: FS – All-News-Economy
Egypt expects its debt to become ‘euroclearable’ in October -minister