The UAE’s Ras al-Khaimah has launched a bond restructuring programme for two state-owned investment vehicles that could see the emirate extending the maturity of around $600m of debt by up to four years.
Ras al-Khaimah Investment Authority (Rakia) and Ras al-Khaimah Capital (Rak Capital), have given bond holders until 30 November to respond to a tender offer to buy back two bonds from investors, or allow them to swap into a new bond that will be issued around the end of the year, or early in 2011.
The tender offer applies to an outstanding AED1bn ($272m) sukuk (Islamic bond) issued by Rak Capital due in 2013, and a $325m sukuk due to mature in 2012 issued by Rakia. If holders of the bonds accept the offer by 30 November they will receive a small premium on the current price of the bond, otherwise they will be redeemed at par value at the end of the year. the tender offer was launched on 15 November.
“Investors are generally happy with this deal as it offers them a premium on where the bonds are currently trading,” says one holder of the bonds. Both bonds are trading at around 95/96 cents on the dollar, and the 30 November redemption offer will pay 102 cents on the dollar.
A roadshow for the new bond issue is due to start in late November under an already established $2bn bond issuance programme established by the government of Ras al-Khaimah, with Rak Capital as the issuer. The final size of the issue is expected to be around $750m.
The new bond will have a tenor of five years, so could bring the new maturity to early 2016 if the new issue is not finalised until after the tender offer to buy back the existing bonds. A source close to the issue says, “Ras al-Khaimah is doing this to lengthen the maturity profile of its debts and consolidate its debts under a single issuer.”
A UAE-based bond trader says, “It makes a lot of sense to do this now. The capital markets are open for strong Middle East credits and it should give Ras al-Khaimah the opportunity to lower its borrowing costs.”
The UK’s Royal Bank of Scotland (RBS), the US’ Citigroup and the National Bank of Abu Dhabi are advising on the tender offer and new bond issue.
The emirate is also in the process of raising $185m through the issuance of two yen denominated bonds. That deal is also being led by RBS.
The ruler’s office of Ras al-Khaimah directed queries to Rakia, which did not respond to requests to comment on the story.