AFC Backs Egypt as Re-Guarantor on JPY75bn Samurai Bond Issue

AFC Backs Egypt as Re-Guarantor on JPY75bn Samurai Bond Issue

Africa Finance Corporation (AFC), the continent’s leading infrastructure financier and solutions provider, today announced its support to the Arab Republic of Egypt as a Re-Guarantor on a private placement offering of JPY 75 billion, 5-year, Samurai bonds.

This landmark financing was guaranteed by Sumitomo Mitsui Banking Corporation with a full re-guarantee provided by AFC and SMBC Nikko acting as the Sole Lead Arranger on the transaction.

The Arab Republic of Egypt, a shareholder and member country of AFC, leveraged the Corporation’s A3 investment grade rating to access international capital markets at a time when borrowing costs are significantly elevated and market access is effectively shut for many emerging market issuers.

The guaranteed Samurai bond issue allows Egypt to deepen its access to the Japanese bond market, while significantly lowering the country’s all-in cost of the funding when compared to an equivalent new US Dollar benchmark Eurobond issue.

This transaction demonstrates AFC’s commitment to providing counter-cyclical support to its member countries and African sovereigns in general, as they implement structural reforms and strategic investments aimed at delivering sustainable economic growth and development.

This bond offering is Egypt’s second foray into the Samurai bond market, coming on the back of an issuance of JPY 60 billion, 5-year Samurai Bonds in March 2022 that was guaranteed by Sumitomo Mitsui Banking Corporation with insurance provided by Nippon Export and Investment Insurance (NEXI).

Proceeds of this bond issue will be used to finance the electricity supply infrastructure under the Government of Egypt’s largest agricultural projects being constructed on more than one million acres of land on the northwest coast of Egypt and is expected to contribute to Egypt’s food security and increase agricultural output by 15%.

Commenting on the bond issue, Samaila Zubairu, President and CEO of Africa Finance Corporation, said, “This transaction demonstrates the very essence of AFC, an institution that provides innovative financing solutions to unleash Africa’s immense potential.

“We are proud to have acted as a reliable bridge connecting Egypt to global capital markets, proceeds of which will finance rapid industrialization and move the country away from exporting agricultural raw materials towards value addition and import substitution. With the right investment in infrastructure, Africa can become instrumental to the global solution to food insecurity.”

Egypt’s Minister of Finance, H.E. Dr. Mohamed Maait also commented on the issuance saying, “Egypt has succeeded in returning to the Japanese markets, as it closed its second Samurai bonds issuance offering of JPY 75 billion, equivalent to about US$500 million, at a pricing of 1.5% per annum and a term of 5 years.

The pricing was made possible by the guarantee provided by Sumitomo Mitsui Banking Corporation and full re-guarantee by Africa Finance Corporation.

The bond issuance helps us to prolong the average life of the public debt portfolio, reduce the cost of external debt, diversify sources and financing instruments and expand the international investor base.

Egypt continues to successfully access the international debt capital markets despite the harsh global economic climate driven by severe inflationary pressures and geopolitical tensions”.

AFC has enjoyed a mutually beneficial relationship with Egypt for many years, with the Arab Republic acceding to membership in 2021 and last year, becoming a shareholder of the Corporation.

This successful bond issuance is a testament to the significant benefits enjoyed by AFC member countries, as they are able to leverage the Corporation’s investment grade rating, network of partners and preferred creditor status in tapping new funding sources.

Member countries also enjoy increased investment allocation, preferred access to AFC’s structuring and lending solutions for sovereign states, reduced debt costs for projects, and access to the Corporation’s Public Sector Advisory and Project Development facilities.