Egypt has sidestepped the inactive public bond market for Middle Eastern issuers by raising as much as US$500m from two privately placed taps. 

The North African sovereign’s first identified international borrowing in six months was arranged by HSBC on Tuesday via two US$250m increases as war rages in Iran and Lebanon.

The buyer or buyers for the new debt could not be confirmed immediately.

Some ESG-oriented European institutions have boycotted the non-investment-grade sovereign over human rights concerns, though both its conventional euro and US dollar green bonds have been significantly oversubscribed.

Finance minister Ahmed Kouchouk earlier told IFR that the sovereign, rated Caa1/B/B after an upgrade by S&P on October 10, was looking to raise around US$4bn from the international bond market in the year to June. This was to match maturing foreign debt while maintaining a “prudent” redemption-to-issuance ratio and gradually reducing external debt.

Recent redemptions include a US$750m five-year bond that matured on February 16.

Halfway to US$4bn

The new taps bring the sovereign’s identified offshore borrowing halfway to Kouchouk’s US$4bn target for 2025/26, according to LSEG data. They follow a US$1.5bn dual-trancher in sukuk format at the end of September.

Egypt’s previous offshore issue was a highly oversubscribed conventional US$2bn pair at the start of last year.  

Strikingly, international buyers took more than half of one of the Islamic bonds and nearly half the other, accounting for as much as US$725m of the total, according to the deal’s distribution data. UK and US onshore investors led the buying.

“US dollar investors are drawn to Egypt due to its relatively high yields, improving reform momentum and strong support from international institutions,” Kouchouk told IFR in October.

The privately placed taps were in conventional format, with one adding liquidity to the larger of Egypt’s January 2025 new issues – the US$1.25bn February 2030 bond that pays a coupon of 8.625%. HSBC was one of six joint bookrunners on the initial deal, which was recently trading at a bid yield of 7.5123%, according to LSEG.

The bank also added US$250m to a US$1.75bn March 2029 bond that priced in February 2019, with HSBC also one of eight bookrunners on the initial line. The bond, which carries a 7.6003% coupon, was at a bid yield of 6.8729% on Wednesday.

It is unclear if Egypt is seeking to increase its international borrowing temporarily to mitigate the Middle East war’s impact. Country risk analysts BMI recently increased its forecast for Egypt's 2025/26 current account deficit to 3.3% of GDP from 2.2%, citing higher energy-driven imports, slower tourist arrivals and a delayed recovery in Suez Canal revenues.

BMI said the higher current account deficit and US$8bn–$9bn of portfolio outflows since mid‑February would “intensify” external financing pressures on Egypt.

Additional reporting by Sara Velezmoro

Source: IFR