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Cablegate: Egypt: Goe Announces Short List of Buyers for Bank Of

VZCZCXYZ0018
RR RUEHWEB

DE RUEHEG #4876/01 2201327
ZNR UUUUU ZZH (CCY ADX078B87 MSI3684 - 648)
R 081327Z AUG 06
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC 0405
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC 0174

UNCLAS CAIRO 004876

SIPDIS

C O R R E C T E D C O P Y (AMB SIG ADDED)

SIPDIS

SENSITIVE
STATE FOR NEA/ELA, NEA/RA, EB/IDF AND EB/OMA
USAID FOR ANE/MEA MCCLOUD AND DUNN
USTR FOR SAUMS
TREASURY FOR NUGENT AND HIRSON
COMMERCE FOR 4520/ITA/ANESA/TALAAT

E.O. 12958: N/A
TAGS: ECON EFIN ETRD EINV EG
SUBJECT: EGYPT: GOE ANNOUNCES SHORT LIST OF BUYERS FOR BANK OF
ALEXANDRIA, MAKES PROGRESS ON OTHER FINANCIAL SECTOR MOU BENCHMARKS


Sensitive but Unclassified. Not for Internet distribution.

REF: A. Cairo 1838
B. Cairo 3746

-------
Summary
-------

1. (U) On August 2 the GOE announced a short-list of prospective
buyers for the state-owned Bank of Alexandria (BOA). Final bids are
due from the six short-listed entities by the end of September. GOE
contacts have provided various estimates of when the BOA sale will
be completed, but post estimates it will not be done before the end
of the year. Announcement of the short-list is a step forward in
the privatization of BOA, one of the benchmarks in the USG-GOE
Financial Sector MOU. The USAID Mission and GOE are close to
finalizing a Monitoring Program for the Financial Sector MOU that
will specify the documentation needed to certify that this and other
benchmarks in the MOU have been met. End summary.

-----------------------------------
GOE ANNOUNCES SHORT-LIST OF BIDDERS
-----------------------------------

2. (U) On August 2, the Central Bank of Egypt (CBE) and the
Ministry of Investment announced a short-list of six financial
entities that will be allowed to continue in the competition for
purchase of BOA. The six candidates will now be allowed to carry
out their own due diligence on the bank in preparation for
submitting final financial and technical bids on the bank. The
short-listed banks/consortia are:

- the Arab Bank Group (based in Jordan) and the Arab National Bank
of Saudi Arabia;
- Mashreqbank (based in Dubai) and Dubai Investment Group;
- Commercial International Bank (Egypt);
- BNP Paribas (France);
- Sanpaolo IMI (Italy);
- EFG Eurobank (Greece).

------------------
TIMING OF THE SALE
------------------

3. (SBU) Final financial and technical bids from the six candidates
are due to the GOE at the end of September. Local contacts have
given varying estimates of when sale of BOA will be completed.
Tarek Amer, Deputy Governor of CBE, told econoff that the sale would
be completed by the end of the current calendar year. He stressed
that although the process has moved slower than some would like, the
GOE is committed to ensuring that the privatization process is
carried out in a manner that maximizes the benefit to all parties.
The privatization of BOA will set a precedent for future
privatization of public banks. According to Amer, any perception on
the part of the business community or the Egyptian public that the
sale was not affected in a transparent manner would lend credence to
the voices criticizing the GOE's broader privatization program (Ref
B).

4. (SBU) Other contacts were more sanguine about the possibility of
concluding the sale quickly. Ziad Bahaa el Din, Chairman of the
Egyptian General Authority for Free Zones and Investment, told
econoff and a visit U.S. Congressional staff delegation that the
sale would most likely be concluded by October, soon after final
bids were received. Bahaa el Din pointed out that progress in
putting the bank up for sale was slow because the GOE wanted BOA to
be in sound financial condition before it was placed on the market.
He was confident that bidders would be eager to conclude the sale
quickly, as the bank's branch system was so extensive that the
purchaser would have an immediate presence throughout the country.


-------
COMMENT
-------

5. (SBU) Announcement of the short-list of bidders is a step
forward for the GOE in meeting its commitment under the Financial
Sector MOU to privatize BOA. By undertaking their own due
diligence, the six bidders will invest their own resources in the
competition to purchase the bank, an indication that they take the

GOE's commitment to sell BOA seriously. The GOE's own audit and due
diligence on BOA were completed in late 2005 and the bank's NPL
portfolio (LE 6.9 billion) was settled by the Ministry of Finance
and CBE in February 2006, using proceeds from the Telecom Egypt IPO
in December 2005.

6. (SBU) In addition to progress on sale of BOA, the GOE has made
progress on several other benchmarks in the MOU. The GOE and USAID
Mission are also close to agreement on the terms of the DSP-II
Monitoring Plan that will specify the documentation needed to
certify that benchmarks have been met. Post will report septel on
progress toward meeting the other benchmarks of the MOU. End
Comment.
RICCIARDONE

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