FRA approves LE 2B short-term bond issuance

CAIRO - 17 December 2019: The Financial Regulatory Authority approved the first program to offer short-term bonds in the amount of LE 2 billion to a securities brokerage firm, allowing it to finance its activities, Chairman of the authority Mohamed Omran said Tuesday.

Omran added in a statement that this comes as the first application of the authority’s Board of Directors Resolution No. (172) for the year 2018, which put a regulatory framework for the rules for issuance of short-term debt instruments.

“The approval of offering short-term bonds is a qualitative step for the Egyptian capital market that increases the efficiency and depth of the market by providing various alternatives of financing tools, so that each party can choose the most appropriate financing tool in accordance with its financial policy,” Omran stated.

Omran asserted that the authority appreciates and supports the positive trend in the Egyptian capital market that seeks steady steps to issue bonds of all kinds to become an attractive market for that instrument of non-bank financing tools.

He noted that the authority’s approval to issue a short-term securitization bond program in the amount of LE 2 billion, alongside with Tuesday’s approval of a bond program for a brokerage firm in the amount of LE 2 billion, will exceed the volume of corporate bond issuance in Egypt, including securitization bonds, to more than LE 18 billion in 2019.

“The issuance of short-term bonds mainly aims to provide financing for the companies' working capital, and in that context came the approval of the authority for the first issuance of the short-term bond program to finance the working capital of a brokerage firm, activating activate it in all areas of brokerage in securities, including financing margin purchases for securities (lending to dealers to purchase securities),” stated Omran.

He explained that the Board of Directors Decision No. 172 for the year 2018 specified the companies and entities that may issue and offer short-term bonds to joint stock companies and partnerships limited by shares, and companies authorized by the authority to practice one of the non-bank financial activities - after the approval of the authority. This is in addition to the banks subject to the supervision of the Central Bank of Egypt and on the condition of its approval.

“These also include international and regional financial institutions that are authorized to issue and offer debt securities in Egypt or can guarantee the obligations of the issuer of these securities under bilateral or international agreements in which Egypt is a party, including the European Bank for Reconstruction and Construction, the International Finance Corporation and other Arab and international institutions, and small and medium-sized companies according to their definition of the rules for listing and writing off securities in the Egyptian Stock Exchange issued by the Authority or the definition issued to it by the Central Bank of Egypt,” he added.

On Nov. 20, the Financial Regulatory Authority (FRA) approved a program issuing short-term securitization bonds worth LE2 billion, according to FRA Head Mohamed Omran. Omran clarified that, as a part of this program, FRA agreed to issue two short-term securitization bonds for Premium International for credit services.