The expected upcoming issuance of the Talaat Moustafa Group’s (TMG) Sukuk, worth about EGP 2bn, is seen as a life preserver for Egypt’s financial and real estate markets.
The issuance is reportedly to have a positive impact in three ways, given the current crisis facing Egypt’s economy due to the ongoing coronavirus (Covid-19) pandemic.
Egypt’s financial instruments market lacks modern financial instruments, and the TMG’s offering can be the starting point for the local sukuk market. It is expected to be a success that will open the door for a new segment of investors who are waiting for this new type of instruments in Egypt.
The real estate market is now awaiting a new start to restore domestic and foreign consumer confidence when the coronavirus crisis comes to an end. The offering is seen as a short-term gateway to that new start. The strong expected coverage will also be a sign of investor confidence, both in the real estate sector in the coming period, as well as a sign of the investor confidence in TMG.
TMG’s Sukuk are expected to offer attractive yields, as the expected offering will cover several segments. A single sakk will have a nominal value of EGP 100, and the pay-off over the life of the sakk is divvied up according to amortisation and payment schedules. It will have a variable return calculated based on the net average rate of return on the state treasury bills (T-Bills) for six months (or 182 days), according to the last auction of bills announced before the start of each yield period, plus a margin which is expected to be between 1-2%.
In light of the uncertainty that currently dominates the economic climate, investors will need to diversify the risks they face in the coming period. Investing in those sukuk will be attractive, especially with a credit rating A and 1-2% higher yield than that of T-Bills.
The real estate market is also awaiting the success of this offering, as it will offer a set of new solutions to finance its upcoming and current projects. It will push many real estate developers to reconsider their financing portfolio for the coming period and add short-term financial instruments.