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Tue 6 Nov 2007 12:58 PM

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RAK seeks rating for benchmark bond sale

Ras Al-Khaimah courting investors over first US dollar Islamic bond to pay for islands being built off coast.

Ras Al-Khaimah is seeking a credit rating and may sell bonds, joining neighbours in the UAE federation in creating benchmarks for borrowers working on multi-billion dollar projects, a government official said.

The federal government of the UAE, the world's sixth largest oil exporter, has no debt. Abu Dhabi, the biggest emirate, sold the country's first government bonds this year and Dubai, the second largest, is seeking a credit rating.

Like Dubai, Ras Al-Khaimah has little oil, and hopes to attract investment of about $13.6 billion by 2009 to develop tourism and industry.

The government's Ras Al-Khaimah Investment Authority (Rakia) started presentations to investors in Dubai on Monday for its first benchmark US dollar Islamic bond to help pay for islands it is building off the emirate's coast.

"We don't think Rakia will need to raise more after this because we will start earning from projects in three years," its Chief Executive Khater Massaad told Reuters on the sidelines of the roadshow.

Other Ras Al-Khaimah borrowers are likely to raise cash, he said. "The government will get a rating within a year and is preparing the documents."

Rakia is not rated, and the bonds will be guaranteed by the government, according to a prospectus handed to investors.

The bonds will help finance Al Marjan Island, a $1.8 billion development of five man-made islands off the coast of UAE's most northerly emirate.

More UAE companies and government investors are borrowing abroad to finance acquisitions and projects, almost tripling the UAE's foreign liabilities in two years to $80 billion on December 31, 2006.

Governments in the world biggest oil-exporting region need to sell bonds regularly to create benchmarks for corporate borrowers, Deustche Bank said this week, estimating the value of Islamic bonds sold by Gulf Arab borrowers would hit $100 billion by 2010, compared with $17 billion last year.

Abu Dhabi sold a $1 billion five-year bond in July after receiving a "AA" rating from Fitch Ratings and Standard and Poor's.

Dubai's government plans to seek a credit rating and is drawing up a financial strategy with advice from JP Morgan and Swiss bank UBS, the director general of Dubai's Finance Department said in February.

Dubai is expected to receive the rating this year as a precursor to selling bonds, the London-based Middle East Economic Digest (Meed) reported in October. (Reuters)

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