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Al-Ahram Weekly 18 - 24 March 1999 Issue No. 421 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 18 - 24 March 1999 Issue No. 421
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Profile Features Travel Living Sports People Time Out Chronicles Cartoons Letters Active month holds promise
by Sherine Abdel-RazekAn active bond market, new privatisation offerings and smoother execution of transactions promise to be permanent market features hereafter. The last six weeks have witnessed a bond market revival with more government and corporate bonds being offered. The relatively slow-moving privatisation programme has gained momentum and a new trading system has been tested.
Often criticised for its limited size, the bond market has been enriched by the new offerings.
The Egyptian government offered LE2 billion worth of 10-year treasury bonds at a fixed interest rate of 9.5 per cent. The bonds are the first-ever with such a maturity period -- the longest termed bonds till now had a seven-year maturity. This bonds issue is the fifth since August last year and comes as part of the government's efforts to broaden its debt market and lay a benchmark for corporate bonds.
Moving to corporate bonds, the Lakah holding company, which earned a high credit rating last month, has also offered LE400 million worth of seven-year bonds. Subscription to 70 per cent of the issue -- which bears an interest rate of 11 per cent -- was through private placement, while the rest was to be offered through public subscription.
Orascom Construction Industries (OCI), one of three affiliates of Orascom Group, issued another bonds batch carrying the same maturity and interest rate. The over-subscribed LE 280 million worth of OCI bonds issue aimed at restructuring the company's debt.
OCI had earlier raised almost LE300 million from an equity issue. This came after a capital increase that was fully subscribed to by the original shareholders of OCI -- the Sawiris family -- who then offered 8.67 million shares out of the company's 48 million shares through both public subscription and private placement.
The public offering was 16 times over-subscribed in the first three days. The rest of the offering was sold through private placement.
Another Sawiris enterprise, MobiNil (the mobile phone service provider), has also had its share of the light. Its shares have chalked up the highest level since it started to be traded on the exchange last year. It fluctuated between LE32.38 and 37 during the past six-month period.The nominal value of the shares when issued was LE10. This gain comes despite customer complaints of the company's network deficiencies.
Moreover, at the extraordinary meeting of the company's general assembly earlier this month, shareholders objected to the intensive advertising campaign that was launched by the company over the last six months. MobiNil has suffered an operating loss of LE144 million during the four-month period ending in September 1998.
MobiNil has plans to issue LE340 million worth of bonds, the proceeds of which will be used to repay the company loan taken out to pay LE1.7 billion to the government to acquire its operating license.
The cement sector also made headlines. After its acquisition of a majority stake in Beni Suef Cement (BSC) in January, Lafarge Cement is negotiating with the Holding Company for Mining and Refractories -- BSC's parent company -- to buy the remaining 24 per cent.
Moreover, in what could be considered a turning point in the government's privatisation programme, a majority stake will be offered in Assiut Cement to an anchor investor, to be followed by a public offering of the remaining stake. The company had previously been offering its shares through the stock market, with a ceiling on the percentage to be sold.
The Ministerial Privatisation Committee allowed the divestiture of 77 per cent of Alexandria Portland Cement to an anchor investor. Interest in cement companies' shares has been stirred up as a result of these moves.
Also on the privatisation front, the Egyptian General Authority for Electricity has chosen EFG Hermes and Merrill Lynch to evaluate the expected offerings of the seven state-owned electricity companies scheduled to be floated this summer. The two investment banks will also act as underwriters for the offerings.
The Holding Company for Metallurgical Industries has decided to reopen the door to receive new bids for the privatisation of its two subsidiaries, the Egyptian Company for Metal Installations (Metalco) and Engineering Industries Company for Steel Works (Steelco). The move came after bids submitted for the two subsidiaries at the beginning of the year were found to be lower than expected.
The expected offerings are expected to be executed in a smoother and faster manner due to the new computerised trading system which will be launched by the end of this year. At a press conference on the new system's experimental trial, Sameh El-Torgoman, head of the Egyptian Stock Exchange (ESE), said that the system will provide more efficient surveillance of market transactions and will help in upgrading the efficiency of the settlement and central depository systems. He added that the system, installed by the Canadian EFA software services, will also give both investors and brokers access to much-needed information to make transactions more transparent.
The banking sector was also active. The Commercial International Bank's (CIB) shares dominated transactions for almost the whole period. CIB has had an eventful month. The bank's managing director, Adel El-Labban, stepped down to work abroad. This was followed by the bank's board decision to appoint Hisham Ezz Al-Arab, a 42-year-old banker who has held senior posts at Deutsche Bank, JP Morgan and Merrill Lynch, as deputy managing director of CIB. While El-Labban's departure did not have a negative effect on CIB shares, Moody's rating agency's announcements that it is reconsidering downgrading the bank's rating for fear that the new management will change El-Labban's sound policies, frightened CIB shareholders.
The shareholders, however, were relieved by the bank's announcement of a 16 per cent increase in net profits during 1998. CIB has also announced the highest-ever dividend per share -- LE3.
To top it all, CIB's banking investment arm, the Commercial International Investment Company (CIIC), has announced a LE300 million merger with the British Flemings, thereby creating a heavyweight market player on equal footings with EFG Hermes.
The US rating agency, S&P, has ruled out the privatisation of the four public sector banks in Egypt in the medium term. The agency has given moderate ratings for four Egyptian banks, two state-owned and two joint ventures. The rating agency said that Egyptian public sector banks have come a long way on the road to reform backed with the privatisation proceeds which helped in correcting the banks' loan deposit ratio. However, it criticises public banks' poor asset quality and operating inefficiency.
