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Abu Dhabi/Manama: Ras Al Khaimah priced $272 million of Islamic bonds on Tuesday while Abu Dhabi announced its second bond sale, part of Gulf plans to deepen regional debt markets.
The bonds are the latest in a string of Gulf sover-eign sales, including issuances from Dubai, Bahrain and a planned Qatari sale, which officials hope will diversify funding sources and investment options for the region.
Sovereign backed bonds are a useful benchmark for corporate issuers - of whom many are looking to finance ambitious projects in the booming region - and could make pricing future sales easier.
Meanwhile, Gulf states are awash with petrodollars on a six-fold increase in oil prices in the last six years. Bankers are struggling to find suitable investment vehicles, especially ones that comply with Islamic law.
"The sales are to diversify sources of funding for those who need the money, and diversifying investment products for those who have money to invest," Gilles Franck, regional head of capital markets for Standard Chartered, who arranged Ras Al Khaimah's sale.
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The emirate priced its five-year, Dh1 billion ($272 million) Islamic bonds at 115 basis points above the three-month Emirates Interbank Offered Rate, part of a programme of sales worth up to $2 billion, Standard Chartered said.
Three-month Eibor is currently at 1.89 per cent. Some 76 per cent of buyers were from the Middle East and the remainder outside the region, reversing the traditional Islamic bond buyer ratio as more are priced in local currencies, and the global credit crunch continues to restrict Western liquidity.
Abu Dhabi plans to sell its second bond to help develop debt markets in the country, an official at the Abu Dhabi Stock Exchange said.
"There is coordination and talks between us and government entities in Abu Dhabi for the issuing of the government bonds," said Rashid Al Baloushi, deputy chief executive officer at ADX, after unveiling a five-year plan for the stock exchange.
"The bonds would be issued by the government as a benchmark."
The bonds would also be of benchmark size, he said, which is generally considered to be worth at least $500 million.
Baloushi told reporters the government had still to decide the size and declined to give a timeframe.
"We are creating a debt market...a comprehensive one," Baloushi said. "There'll be more liquidity and shareholders will have new pools of investment."
The sale is one of a growing number in the Gulf in recent weeks, marking a spike in issuance following a lull when firms shelved bond plans after defaults on US home loans raised the cost of borrowing, triggering a credit crunch.
In July, Abu Dhabi sold a $1 billion dollar-denominated bond.
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