United Arab Emirates’ Ras Al Khaimah Investment Authority (RAKIA) priced $325 million of Islamic bonds in line with guidance at 150 basis points over the London Interbank Offered Rate, arrangers said on Monday.
The five-year Islamic bonds, or sukuk, are one of only three sales advertised as benchmark-size to be marketed publicly in the Gulf since US mortgage defaults sparked a global credit crunch in July.
Benchmark size is typically considered at $500 million and above, although arrangers of RAKIA’s sukuk said the final bond size of $325 million was also benchmark.
The US home loan crisis has made banks more reluctant to lend, raising borrowing costs. One of the three benchmark sukuk was pulled from the market earlier on Monday due to “unfavourable market conditions” an official at one of the arranging banks said.
Before the credit crisis, the weighted-average spread for than $15 billion of Islamic bonds on the HSBC-DIFX Islamic bond index was 65 basis points over LIBOR at the end of June.
By the end of October that had widened to 125 basis points over LIBOR.
HSBC Holdings Plc, Credit Suisse and the NBD Investment Bank arranged the RAKIA sale. NBD Investment is a unit of Emirates-NBD.
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