CAIRO: Egypt has changed its laws to let utilities and other quasi-government organizations issue bonds in a move to expand its debt market, officials and fixed-income specialists said. A first offering is expected within weeks. Egypt has also set a fixed schedule for the issue of Treasury bonds to make them predictable, boost their liquidity and create more demand for them, said Mohamed Assaad, public debt adviser to the minister of finance. Now the law allows quasi-government or major supranationals to raise debt in Egypt s capital market, Assaad told Reuters in an interview on Wednesday. The government, which has expanded its borrowing dramatically in the last few years, has streamlined rules for both corporate and government instruments. It hopes to set up a secondary bond market this year. Allowing state utilities to issue bonds would also make it easier for the government to finance infrastructure and other projects. The market for bonds from state organizations would be large because their yield tends to be higher than that of government bonds, said Mostafa Farid, a fixed income specialist at investment bank Beltone Financial. This is major, because all utilities in Egypt can be financed this way, Farid said. In this way, the bonds issued by utilities could be tied to their income flows, Farid added. Floating rate note The New Urban Communities Authority, a state body responsible for developing satellite cities around Cairo, is expected to issue a floating rate note on the stock exchange within weeks, a move that would not have been possible earlier, said a source close to the deal who asked not to be named. In May, the authority securitized LE 4.65 billion in installments for land it had sold, with the notes maturing in 2017. Because quasi-government bodies were not allowed to issue bonds at the time, the authority was forced to raise the funds through a special vehicle formed for the purpose. The lead advisers on the issue were Commercial International Bank and HSBC. The government is working to improve its direct borrowing and standardize its issuance dates. Under a schedule supplied by the Ministry of Finance, the government will issue 3-year bonds in January, April, July and October, 5-year bonds in March and September, 7-year bonds in February and 10-year bonds in August. Now everyone will know 10-year bonds will be issued only in August ... so they can plan in advance, Assaad said. The 7-year bonds will be issued only once a year, but be reopened monthly in smaller nominals. The use of Egyptian bonds to finance the government s deficit has expanded dramatically, rising to LE 130 billion from only LE 13 billion five years ago, Assaad said. The government will restrict its bond issues to 3-, 5-, 7- and 10-year maturities in 2010, Assaad said. It will raise LE 15 billion in this quarter alone, he added. It has been seeking to increase the maturities of its borrowing. The nominal amount raised in the 5-, 7- and 10-year notes should reach LE 8-10 billion each due to continuous reopening, Assaad said.
