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Egypt sukuk will be great for the Islamic market — but not yet

Egypt’s announcement last week that it plans to issue a $2bn sovereign sukuk was a welcome advertisement that put the country back on the map for investors and underscored the change in its attitude towards Islamic finance. But it should not be hasty. A lot more work needs to be done before Egypt attempts to access this line of funding.

  • 14 Feb 2012
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The acceleration of Egypt’s quest for an Islamic bond might have something to do with the country’s difficulty in accessing more traditional forms of finance. Last week’s announcement of a $2bn target for a sovereign sukuk came shortly after the country’s central bank struggled to attract much interest in an auction of five year bonds. And it failed to sell any six year paper at all.

Whatever the driver for the move, the news was warmly received by financial professionals, Islamic and conventional alike. That’s not surprising. There were limited opportunities for the former to engage with Egypt during the 30 years of Hosni Mubarak’s presidency — which did not particularly encourage Shariah compliant products.

You could just about get an ijara (leasing) sukuk done — as one company (and only one), Al-Tawfeek Leasing Co, showed in 2010. But you weren’t allowed to even call it a sukuk.

The overwhelming sentiment towards an Egyptian sovereign issue, however, is that a deal like this is something the emerging nation needs to work towards and earn, rather than being a quick fallback solution that can be thrown into the mix. On that basis, the second half of 2012 looks like the earliest realistic timeframe for a deal.

But any substantive talk of an Egypt dollar sukuk — or even a conventional international bond, for that matter — is unlikely until the government can articulate a sensible medium term financing strategy. Confidence in its ability to implement economic policies would be handy. Bothersome regulations that inhibit Islamic finance also need changing.

Presidential elections in June might provide some answers, and not before time. Ratings agencies certainly need convincing: S&P downgraded the sovereign on Friday.

A $3.2bn loan from the IMF, still to be signed, would be a big step towards this goal. Even then, the government would be well advised to put together a travelling team to roadshow and market the “new” Egypt. After all, if the conventional market is nervous of Egypt’s credit then it is hard to see why the Islamic market would be any different.

  • 14 Feb 2012

Bookrunners of Global Covered Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 30 Sep 2014
1 BNP Paribas 11,290.05 40 6.90%
2 Natixis 10,937.59 42 6.69%
3 UniCredit 10,926.69 78 6.68%
4 HSBC 8,501.70 39 5.20%
5 Commerzbank Group 8,157.44 37 4.99%

Bookrunners of Global FIG

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 29 Sep 2014
1 Bank of America Merrill Lynch 83,883.16 293 7.35%
2 JPMorgan 78,140.03 319 6.85%
3 Goldman Sachs 73,299.65 305 6.42%
4 Deutsche Bank 70,049.78 253 6.14%
5 Morgan Stanley 67,629.03 334 5.93%

Bookrunners of Dollar Denominated Covered Bond Above $1bn

Rank Lead Manager Amount €m No of issues Share %
  • Last updated
  • 30 Sep 2014
1 Citi 1,499.34 5 0.00%
2 RBC Capital Markets 1,206.44 4 0.00%
3 TD Securities Inc 977.84 3 0.00%
4 HSBC 673.33 3 0.00%
4 Bank of America Merrill Lynch 673.33 3 0.00%

Bookrunners of Dollar Denominated FIG

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 30 Sep 2014
1 Deutsche Bank 29,014.95 77 4.59%
2 Goldman Sachs 20,512.35 61 3.24%
3 BNP Paribas 19,260.40 56 3.05%
4 Bank of America Merrill Lynch 17,618.84 45 2.79%
5 Barclays 17,595.94 67 2.78%

Bookrunners of Euro Denominated Covered Bond Above €500m

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 30 Sep 2014
1 BNP Paribas 8,089.51 26 8.92%
2 Natixis 7,165.28 23 7.90%
3 UniCredit 6,347.32 23 7.00%
4 Commerzbank Group 5,530.05 18 6.10%
5 Barclays 4,897.53 15 5.40%

Global FIG Revenue

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 22 Sep 2014
1 JPMorgan 1,015.47 1105 8.40%
2 Bank of America Merrill Lynch 792.11 1022 6.56%
3 Goldman Sachs 786.98 831 6.51%
4 Deutsche Bank 734.85 1038 6.08%
5 Citi 723.95 1033 5.99%

Bookrunners of European Subordinated FIG

Rank Lead Manager Amount €m No of issues Share %
  • Last updated
  • 30 Sep 2014
1 HSBC 10,296.50 19 12.29%
2 Deutsche Bank 7,195.83 21 8.59%
3 UBS 6,207.03 20 7.41%
4 Bank of America Merrill Lynch 5,371.83 21 6.41%
5 SG Corporate & Investment Banking 4,804.40 16 5.74%