October 19, 2019 / 4:27 PM / a month ago

Egypt signs agreement with Euroclear to widen its domestic debt investors

CAIRO, Oct 19 (Reuters) - Egypt signed an agreement with Euroclear, Europe’s biggest settlement house for securities, to create a cross-border link with the Brussels-based institution, Egypt’s finance ministry said on Saturday.

The agreement, signed at the Egyptian embassy in Washington, D.C., will link the Egyptian government’s local currency debt issuance tools with Euroclear via a central securities depository to be established in Egypt by its government.

That will make domestic Egyptian debt available to a larger number of foreign investors, and is a step in eventually making Egyptian debt “Euroclearable”, Euroclear said in a statement.

In April, Egypt signed a memorandum of understanding with Euroclear to create the right market conditions for local currency sovereign debt issuance. Finance Minister Mohamed Maait told Reuters last month that he expected Egyptian debt to become “Euroclearable” in early 2020.

“This agreement will allow the market to maintain a large volume of liquidity and will lead to a decline in the borrowing cost, subsequently lowering yields on the debt bill and increasing the liquidity of local assets,” Maait said, according to the ministry’s statement.

Settling debt via Euroclear requires high levels of transparency as well as specifics on the size and structure of the debt to be issued, among other criteria under Euroclear rules.

In September, Maait said Egypt intended to issue international bonds worth $3 billion to $7 billion in the 2019-2020 financial year.

Stephan Pouyat, global head of capital markets and fund services at Euroclear, said the deal would help Egypt achieve its goal of reaching a wider international institutional investor base and would lead to “a more robust capital market.”

Egypt has borrowed heavily from abroad since a three-year $12 billion package was agreed with the IMF in late 2016. Analysts say it faces a tough repayment schedule. (Reporting by Yousef Saba and Ehab Farouk; Writing by Mahmoud Mourad and Yousef Saba Editing by Ros Russell)

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