EGPC to issue first oil export notes (Trade Finance)

Egyptian General Petroleum Corporation (EGPC) is to issue $1.55 billion of export-backed notes in the first export future flow deal to come out of Egypt and the company's first capital markets transaction.

Standard & Poor's has assigned preliminary ratings to the A class notes to be issued by Petroleum Export Limited, a special purpose vehicle. The class A-1 and A-2 notes are wrapped and each received AAA ratings. Insurance for the $500 million A-1 notes is provided by MBIA, while XL Capital is covering the $250 million A-2 tranche. The $800 million A-3 notes are rated BBB.

Petroleum Export will purchase oil and naphtha from EGPC on a forward sales contract and sell to Morgan Stanley Capital Group, which acts as offtaker on the deal. Morgan Stanley is global coordinator, while BNP Paribas and Merrill Lynch are also understood to be joint bookrunners. National Bank of Egypt and Banque Misr are reportedly co-managers.

Until now, EGPC has relied on inexpensive short-term, commodity-backed loans, most recently completing a $100 million syndicated pre-export financing in 2004. Trade bankers say that legal constraints on the pledge of receivables have in the past prevented lending above a one-year term but this does not appear to affect the export notes: the

class A-1 and A-3 notes mature in six years, while the class A-2

notes are expected to be due in June 2010.