Egypt licenses EGP 1 billion fund to buy equity in distressed factories

Egypt's Financial Regulatory Authority (FRA) has licensed a fund with EGP 1 billion of capital to take equity stakes in distressed industrial companies, with unit subscription due to start on 4 October, its 2 October announcement said.

The Central Bank of Egypt (CBE) and the Minister of Industry launched the vehicle, the Distressed Factories Restructuring Fund, on 1 October, the central bank said. The fund, licence No. 1033, is offering 1 billion units at a nominal EGP 1 each, including units allocated to its founder, the FRA said.

The capital is payable in instalments as viable investments arise. It is a closed-end private equity vehicle whose units are placed privately with qualified institutional, corporate and individual investors under FRA Board Decision No. 48 of 2019. CI Capital B.I. for Fund Management, Investment and Venture Capital will manage the investments, and independent financial advisers registered with the FRA will value the fund's net assets twice a year.

The CBE said the contributing banks include National Bank of Egypt, Banque Misr, Arab African International Bank, the Agricultural Bank of Egypt and the Export Development Bank of Egypt, whose top executives attended the launch meeting. The release did not state individual contributions.

The fund will take direct equity stakes in struggling companies in food, engineering, chemicals, textiles and apparel, pharmaceuticals and building materials, the FRA said. It targets industrial enterprises that carry heavy debt and deferred obligations but have viable products, solid market share and sound economic fundamentals. The CBE said the fund's team will work with company management on restructuring plans covering loan restructuring, additional capital injections, programmes to improve operational efficiency and stronger governance.

Factories can apply through the Ministry of Industry's Unified Digital Platform for Supporting Manufacturers, through which the fund will evaluate applications, the CBE said. Mohammed ElSeweedy, chairman of the Federation of Egyptian Industries, chairs the fund's Investment Committee, the central bank said. The FRA said the manager will select targets using quantitative and qualitative criteria for turnaround potential, backed by feasibility studies.

Daily News Egypt reported on 3 October that subscription was set to open on Sunday 4 October, citing the FRA. The FRA and CBE announcements give no timetable for the first investments.