Issuer: Egyptian Financial Company for Sovereign Taskeek
Obligor: Arab Republic of Egypt
Size: $1.5 billion
Structure: Sukuk
Tenor: Three years
Banks: Abu Dhabi Islamic Bank, Citi, Crédit Agricole, Emirates NBD Capital, First Abu Dhabi Bank and HSBC (joint lead managers and bookrunners)
Date: February 2023
In one of the most keenly anticipated debt market transactions, the Arab Republic of Egypt finally delivered its maiden international sukuk last year. In doing so, it joined the ranks of almost every other Islamic country in accessing this form of financing.
The transaction, first mooted a decade ago, was not only its inaugural sukuk, but the country’s first debt issue on the international markets since 2021, ending a hiatus caused in part by sharply rising interest rates.
With such a long time lag since the country last issued, investor anticipation had been building. This was rewarded in February when Egypt priced its $1.5 billion three-year sukuk with a profit rate of 10.875%. Reoffer was at 99.688, for a yield of 11%.
At its peak, the orderbook was over $6 billion, with strongest demand from regional shariah-compliant investors in the Middle East and North Africa, which received 59% of the allocation.
Global emerging-market investors also came in for the transaction in good size, helping to drive down the yield
Global emerging-market investors also came in for the transaction in good size, helping to drive down the yield from an initial 11.625% target to the final reoffer yield of 11%, which was through Egypt’s conventional curve.
The ability to achieve such pricing – essentially at cheaper levels compared with a conventional bond – was a key reason the Egyptian ministry of finance choose to issue a sukuk, together with the opportunity to diversify its funding and investor base.
It has been a long time in the making; Egypt’s government passed a bill permitting sukuk issuance as far back as 10 years ago.
Yet it was not until more recently, about two years before the deal, that the country’s ministry of finance and debt management office, together with their advisers, started to work through the executive regulations of the sukuk law and finalise the documentation to make it happen.
The combination of the success of the transaction, with its high-profile quality and its unique structure – relying on a purchase of usufruct of real estate assets by the issuing entity and leased back to the ministry of finance – make it Euromoney’s Islamic finance deal of the year.
