Unrated bonds regulation is currently under study and is expected to be offered within this summer, the Egyptian Financial Supervisory Authority (EFSA) Chairman, Sherif Sami, told Daily News Egypt on the sidelines of the Investors Summit EGX 2015 conference.
Unlike rated bonds, unrated bonds do not have the AAA to D rates that indicate their profitability of repayment. The trade of such bonds is made by skilled investors who take the necessary steps, such as the issuer’s financial and credit history, to determine the default probability on the bond.
The EFSA chairman added that a meeting with the board of directors will take place on Wednesday in order to discuss the regulations.
“We will propose it be added to the executive regulations because we believe small and medium enterprises can use [it],” Sami said. “If a company needs EGP10m, it won’t need a rating that will cost hundreds of thousands.”
In April, Minister of Investment Ashraf Salman announced the government’s intent to offer unrated bonds for “sophisticated investors”.
Salman clarified that these bonds will not be offered for retailers, but rather investors who have been in the market long enough to trade these bonds.