Palm Hills Developments (PHD) announced that it has commenced the regulatory and the technical procedures related to the issuance of securitised bonds by up to EGP1bn, as part of a bigger programme to monetise receivables of up to EGP2.5bn over two to three years. Regulatory approvals are underway, as well as the bonds credit rating. The first tranche is expected to close before year-end with EGP350-450mn, while the rest will be completed in 2017/18. The bonds will have an expected tenor of five years and will target money market funds, local banks and insurance companies. Proceeds of the transactions will be utilised mainly in refinancing existing debt, in the form of non-recourse off-balance sheet financing.   Balance sheet leverage had continued to rise for PHD, owing to its accelerated construction plan adopted since 2013. Total debt-to-equity had reached 0.59x in June, net-debt-to-equity 0.43x, the highest within our coverage universe in Egypt. We view the news positively, especially given its non-recourse nature, and in light of the prevailing market rationalisation, in which lower leverage would be favourable. We estimate that closure of the first tranche would lower the company’s debt by c9-12%, assuming a haircut of 5-7% on the receivables’ value as guided by management. (Company disclosure, Mai Attia, Sara Boutros)   Palm Hills: EGP2.44 as of 05 October 2016, Rating: Buy, FV: EGP3.06 per share, MCap: USD634mn, PHDC EY / PHDC.CA