The government is studying the introduction of unrated bonds to “sophisticated investors” with the Egyptian Financial Supervisory Authority (EFSA) and the bourse, Minister of Investment Ashraf Salman announced Monday.
“These bonds will not be offered to retailers but rather investors who have been in the market long enough to trade with these bonds,” the minister said.
He explained that these investors will have the expertise to trade these bonds without needing the protection of rates, “unlike normal retailers”.
Unlike rated bonds, unrated bonds do not have the AAA until D rates that indicate their probability of repayment. Trade of such bonds is made by skilled investors who take the necessary steps, such as the issuer’s financial and credit history, to determine the default probability on the bond.
On 26 March, Salman, along with Minister of Finance Hany Kadry Dimian, announced that the names of legal and financial consultants for the issuance of the $1.5bn bonds.
The ministers noted that Helmy, Hamza and partners was the local winner of the local legal consultant bid for the international bonds to be issued, while Dechert LLP was the international winner.
“Seven local offices were invited and two were accepted technically,” Dimian said. “Ten international offices were invited and two offices were technically approved.”
The minister added that five financial banks were selected as financial advisors, out of a total of 19 banks who applied, which are: BNP Paribas, Citibank, Morgan Stanley, JP Morgan and another French investment bank.
The local financial advisors selected were the National Bank of Egypt and Abu Dhabi National Bank.
The finance minister has previously announced that the government is looking to diversify the debt market and is currently studying the sukuk law. Dimian indicated that issuing international sukuk is not unlikely.