The Arab Investment and Export Credit Guarantee Corporation (Dhaman) issued a Non-Honoring of Sovereign Financial Obligation (NHSO) insurance policy to cover a $500 million 7-year international commercial loan to its Member Country the Arab Republic of Egypt. The loan is provided within the framework of the decisions of the twenty-seventh climate summit held in Sharm El-Sheikh in November 2022.
The Arab Republic of Egypt successfully closed a $500 million dual-tranche 7-year international commercial loan equally provided by Deutsche Bank AG and the Arab Banking Corporation (A.B.C), Bahrain, benefiting from a credit insurance policy provided by Dhaman (rated A+ by S&P).
This landmark deal is the first international loan market transaction benefitting from a multilateral credit-enhancement mechanism for Egypt, involving a multilateral insurer Dhaman and mobilizing the private insurance market.
Mr. Abdullah Al-Sabeeh, Director General of Dhaman, said that this transaction “demonstrates Dhaman’s commitment to its message of contributing to achieving the SDGs, as well as Egypt’s commitment to the diversification of its external financing sources through blended finance solutions with strong support from both Dhaman and global private insurers”, adding that “innovative credit-enhanced solutions in favor of Member Countries are one of the pillars of Dhaman’s 2022-2026 strategic plan.”
The transaction allowed Egypt to secure favorable financing terms, materially more advantageous than those available on the international bond market. Dhaman provided a credit insurance policy on a sovereign blended finance loan transaction, covering up to 95% of the scheduled principal and related interest. The mobilization of Dhaman’s credit insurance policy allowed Egypt to secure a reduced loan margin, resulting in savings compared to current Eurobond yields. This transaction, therefore, supports efforts to stabilize and reduce Egypt’s cost of funding, extend maturities and access new funding sources.
This transaction also demonstrates Egypt’s strong ESG policy leadership and contributes to the Government’s human capital development agenda. The proceeds will be used to cover social projects eligible under Egypt’s Sustainable Financing Framework, announced at COP27 in Sharm El-Sheikh in November 2022, including health and education budget expenditures aligned with United Nations Sustainable Development Goals 3 (good health and well-being) and 4 (quality education).
The statement praised the constructive cooperation between all parties to the process, whether the financing entities represented by Deutsche Bank AG and the Arab Banking Corporation in Bahrain, the insurance authorities represented by the Arab Investment and Export Credit Guarantee Corporation “Dhaman” and the reinsurance entities, and the consulting entity represented by Rothschild & Partners in France. This is in addition to the legal bodies that included legal advisory bodies in the United Kingdom and Egypt.