Egypt sold USD 750 mn in green bonds yesterday in what was the region’s first sovereign offering of the climate-friendly securities, Bloomberg reports. The issuance was almost 5x oversubscribed, attracting some USD 3.7 bn worth of orders for the bonds, pointing to growing appetites for climate-friendly securities worldwide. The government had been expected to sell USD 500 mn of the bonds.

About the offering: The sale consists five-year notes, which were initially taken to market at a yield of 5.75% but were sold 50 bps lower at 5.25%, Reuters suggests. The bonds will finance the development of Egypt’s USD 1.9 bn portfolio of green projects, including clean transportation, renewable energy and sustainable water management, the report noted.

The offering attracted new investors, with a virtual roadshow “attended by many who are speaking to Egypt for the first time,” Reuters reports, citing an unnamed source familiar with the transaction. Sustainability analysts and global investors were among those interested in the sale., said that while the bonds offer value “when compared to the existing secondary Egyptian curve … I think they might tighten,” Zeina Rizk, Arqaam Capital’s executive fixed income director, said as the bonds were being marketed. Recent market weakness over fears of a second covid-19 wave and “market indigestion” from the large number of new issuance could make investors more selective, she said.

Advisors: Credit Agricole, HSBC, Citibank, and Deutsche Bank were tapped earlier this year to manage and market the offering.

Background: Egypt’s first sovereign green bond sale comes as part of the government’s debt diversification strategy, which entails a shift towards longer-term debt, which the government hopes will constitute some 52% of borrowing by June 2022. CIB is expected to follow suit and issue Egypt’s first corporate green bond next month.

DEBT WATCH- Two corporate sukuk offerings worth a combined EGP 4.5 bn are expected to go to market this year, including Sarwa Capital’s planned EGP 2.5 bn issuance and another EGP 2 bn sale from an unnamed company in the services industry, head of the Financial Regulatory Authority’s Central Administration for Finance Sayed Abdel Fadil told Al Mal. Sarwa’s single-tranche issuance — which will be the second corporate issuance of the sharia-compliant bonds to hit the Egyptian market since the FRA published regulations for the bonds last year — is expected to go to market by the end of October, said Abdel Fadil. He did not clarify a timeline for the unnamed company’s planned issuance, but said it is still in its early stages.

About Sarwa’s issuance: The sukuk, which were originally to hit the market mid-September, carrya seven-year tenor, maturing in 2027, and will be the second sukuk issuance to hit the Egyptian market after Talaat Moustafa Group’s (TMG) offering earlier this year. Sarwa tapped ALC Alieldean Weshahi & Partners as legal counsel and KPMG Hazem Hassan as financial auditor for the issuance. Middle East Ratings and Investor Services (MERIS) will issue a rating on the offering.

Who else is offering sukuk? Another EGP 2 bn issuance by Amer Group is also in the works (though its timing has yet to be announced) while a planned USD 50 mn issuance by aviation leasing company CIAF was pushed indefinitely because of covid-19, but could see the light in 1Q2021. The Egyptian Petrochemicals Holding Company was also reportedly planning an EGP 1 bn sukuk issuance — the first by a state-owned company — though this has not materialized as of yet. TMG was the first to issue EGP 2 bn in sukuk in April 2020, in an offering that was 2.5x oversubscribed. The sukuk were listed on the EGX earlier this month as part of TMG’s three-year EGP 4.5-5 bn sukuk program intended to finance the real estate company’s leasing projects.

DEBT WATCH- More EBRD funds in the pipeline for Abu Qir metro conversion project? The European Bank for Reconstruction and Development (EBRD) has received a formal loan request from the government for EUR 250 mn to partially fund a project to convert Alexandria’s Abu Qir railway into an underground metro, Deputy Regional Director Khaled Hamza tells Al Mal. The bank is expected to look into the request sometime next year, he said, without providing further information. The European Investment Bank has already agreed to provide EUR 750 mn to help finance the project, which is expected to cost EUR 1.5 bn in total.

EBRD has invested EUR 1.36 bn in Egypt so far in 2020, Hamza told the newspaper. The investments include EUR 657 mn that were channeled to different industries and EUR 350 mn for trade finance, Hamza said, without giving details on the remaining amount. Overall, the bank supported 13 projects through direct funding, credit lines for on-lending, or trade finance activities by five local banks — CIB, Banque Misr, the National Bank of Egypt, QNB, and NBK Egypt, he added. Those five banks received at least USD 100 mn each, with the EBRD in talks with two unnamed banks for an additional USD 100-200 mn for on-lending to SMEs before the end of the year. According to Hamza, the amount channeled through banks came as part of the EBRD’s covid-19 global solidarity package, which we laid out in our recent sit-down with EBRD managing director for the SEMED Heike Harmgart.

Social spending programs in the Middle East and Central Asia are still lagging behind the EM average, despite making “notable progress in recent decades,” which is undermining the region’s human development outcomes, according to an IMF report (pdf). While emerging markets spend an average of 14% of GDP on social support programs, Middle Eastern and Central Asian governments earmark only 10.4% of GDP for the same purpose. This disparity is more concerning when looking at the outcomes from these spending initiatives; it appears that emerging markets are not only spending more, but that their spending has greater efficiency. “Increasing the efficiency of spending in the region to the global frontier could — without any increase in outlays — eliminate one-third of the [human development index] gap,” the report says.

Egypt is among the countries that got props for shoring up its social safety net before the pandemic broke out. While the report does not dive into the details of Egypt’s social spending outlays (and specifically excludes subsidies from its calculations) the Sisi administration has been prioritizing social spending and rolling out programs, such as the Takaful and Karama cash subsidy program — which was introduced in 2015. The report also gives Egypt, Pakistan, and Mauritania brownie points for introducing financial support targeting vulnerable women, saying that continued support for vulnerable groups must be a key priority for governments’ covid-19 response packages.

Egypt’s FY2020-2021 budget shows state spending rising 9% y-o-y, with increases of up to 70% on essential services like education and low income housing. The constitution already requires the country’s budget to have 7% of GDP allocated on education and 3% on healthcare so maybe “boosting the efficiency of spending,” as the report suggests, could help bolster the efficacy of their outcomes.

Palm Hills Developments (PHD) and CI Capital’s Taaleem have set up a joint venture to develop their planned EGP 1.6-1.9 bn life sciences university in PHD’s Badya compound, according to a press release (pdf). The two companies signed yesterday a shareholder agreement for the JV, of which Taaleem will own 60% and PHD holding the remaining 40%. The two companies signed an MoU in June for the university, which will span 100k sqm and accommodate up to 9k students. It will be established in partnership with Medical University of Vienna International and is expected to open its doors in 2022.

Background: CI Capital is a minority shareholder with a 16.4% stake in Taaleem, which owns the Nahda University in Beni Suef, the largest private university in Upper Egypt. The Badya compound is a 3k-feddan West Cairo project under development by PHD in partnership with the New Urban Communities Authority.

M&A WATCH- HeidelbergCement looks to acquire 100% of subsidiary Suez Cement: Suez Cement’s German parent company HeidelbergCement has submitted a mandatory tender offer to the Financial Regulatory Authority (FRA) for the remaining 33% stake it doesn’t already own in the company, according to a regulatory filing. The MTO is for nearly 59.8 mn shares at EGP 7.50 apiece, giving the transaction an initial value of more than EGP 448 mn.

Suez Cement, in turn, is looking to snap up a 28% stake in subsidiary Tourah Portland Cement Company (Tourah Cement). The company launched a separate MTO for more than 20 mn shares at EGP 7.18 apiece, valuing the stake at more than EGP 144 mn, the company said in a disclosure. Suez Cement currently holds a 66.2% stake in Tourah Cement. There were no details on the reason for Heidelberg’s MTO for Suez. Suez said in a filing to the EGX (pdf) that Heidelberg was advised by local representatives to have Suez lodge a separate MTO for Tourah in a bid to protect shareholders, and avoid any regulatory hangups caused by the first MTO. HeidelbergCement subsidiary Ciments Francais holds direct and indirect stakes in Tourah of up to 55%.

The cement industry in Egypt has been suffering for years from a drawn out supply glut that has seen producers lose bns. Lafarge Egypt's CEO Solomon Baumgartner Aviles said last month that as many as six players could be forced to exit the market by 2021. Tourah Cement is one candidate: the company has already suspended operations, and is currently struggling to turn a profit. Suez Cement’s losses have also been widening in recent quarters, with sales struggling to pick up.

Security authorities in Alexandria are imposing fees on transporting hazardous materials out of the city’s main port, according to a letter from the security directorate to shippers picked up by Al Mal. Shipments containing explosive substances or chemicals classified as dangerous will incur “transportation safety” fees of EGP 100-110 for each km traveled. Alexandria International Container Terminals earlier this month doubled fees it charges for handling containers carrying hazardous goods inside the port. The new safety guidelines come after August’s Beirut port blast which has seemingly prompted authorities to take additional preventative measures.

STARTUP WATCH- Ride-hailing app Swvl is looking to expand to the Gulf in the coming months, General Manager Omar Selim told Al Mal, without specifying which countries the company is targeting. According to Selim, the company prefers to operate in emerging markets with market demographics that are similar to Egypt’s, including population size and traffic congestion. Swvl said last year it plans to launch in the Philippines, Indonesia, and Bangladesh by the end of 2020. The company already operates in Kenya, Nigeria, and Pakistan.

EARNINGS WATCH- Cleopatra Hospitals Group (CHG) is on track to record 15% y-o-y revenue growth in 3Q2020, with an expected q-o-q increase of 50%, according to a trading update (pdf) citing unaudited figures. The group expects to see its revenue grow 7% y-o-y in 9M2020. The anticipated uptick in CHG’s topline is supported by recovering patient volumes across the group’s different services caused by the lifting of coronavirus restrictions, the transformation of El Katib and Queens hospitals into covid-19 treatment facilities, and the introduction of a number of digital and at-home medical services for those unable to visit CHG’s hospitals.

The company has taken several steps in 3Q2020 to grow its business operations, “signing multiple new agreements to expand its service offering and penetrate into new, fast-growing segments of the healthcare industry.” These include the creation of a joint venture with Bedaya for Medical Services fertility center (60% owned by CHG), the creation of the Egyptian Healthcare Facilities Services joint venture (49% owned by CHG), and the renovation of Nile Badrawi Hospital’s 10th and 11th floors.

MOVES- Sherif Elbehery (Linkedin) has been tapped as managing director of Misr Digital Innovation Company, Banque Misr’s digital banking arm, the bank’s deputy chairman Akef El Maghraby told Hapi Journal. Elbehery was previously the bank’s head of SMEs, microfinance and Islamic banking — a position that will now be filled by Mohamed Antably (Linkedin). Antably was most recently Attijariwafa Bank Egypt’s director of SMEs and business banking. El Maghraby will be chairman of the digital banking arm.