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Telecom Egypt seeks to raise usd323 Mln in record bond sale

Telecom Egypt, the state-owned fixed- telephone line monopoly, is seeking to raise 2 billion Egyptian pounds (USD323 million) in a record corporate bond sale. The company announced the sale of the bonds, which mature in five years, in ads today in Cairo newspapers including state-owned daily Al-Ahram.

The bonds are divided into two equal parts, one carrying a fixed interest rate of 10.95 percent a year and the other offering 0.7 percent above the Central Bank of Egypt's discount rate, which is currently 10 percent, the ads said.

"It's an interesting investment because it's a monopoly and it has a strategic significance for the government which is expected to support it when necessary,'' said Nicolas Photiades, managing director of Orion Financial Solutions, a Beirut-based financial consultancy.

"The most obvious risk is a sudden depreciation of the Egyptian pound.''

The transaction marks the first bond sale by Cairo-based Telecom Egypt and the largest by a company in the country, overtaking the $260 million bond sale earlier this year by mobile telephone operator Orascom Telecom Holding SAE, said Ziada.

"Egypt Telecom needs to invest in expanding and modernizing the network, and in new services," said Wael Ziada, telecommunications analyst at the Egyptian Financial Group-Hermes Holding, an investment bank in Cairo. Only 12 percent to 15 percent of Egypt's 70 million people have direct access to a fixed telephone line, Ziada said in a telephone interview. The offer closes in two weeks and the bonds will be traded on the Cairo and Alexandria Stock Exchange. Each bond will have a face value of 100 Egyptian pounds.

Telecom Egypt will use the money to refinance part of its debt and to help fund expansion plans, the announcement said. The company's debt is estimated at 4.7 billion Egyptian pounds, or USD750 million, owed to banks and the government. Al-Alam Al-Youm newspaper on Dec. 21 quoted the company's vice-chairman, Ali Salama, as saying bank loans carrying an interest rate of 17 percent will be refinanced.

Moody's Investors Service's unit in Egypt, Middle East Rating and Investors Services, has given Telecom Egypt an AA investment grade, said today's announcement. State-owned Banque du Caire SAE and Bank of Alexandria SAE, along with Citibank Egypt and the Cairo-based Arab African International Bank, have underwritten the sale, it said.

Marseille,01 31 2005
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