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Mon 6 Jul 2009 09:31 PM

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RAK starts marketing sukuk - report

Sheikdom reported to have started investor meetings to sell Islamic bonds, say two bankers and an investor.

Ras al-Khaimah has started investor meetings to sell Islamic bonds, according to two bankers and an investor.News agency Bloomberg, citing the unnamed sources, said Standard Chartered and BNP Paribas are managing the sale and reportedly were meeting with investors in Dubai on Monday.

Ras al-Khaimah’s government sold AED1 billion ($272 million) of Islamic bonds in its first rated sale of the securities in May last year.

The five-year floating-rate sukuk was priced at 115 basis points more than the three-month Emirates interbank offered rate.

The bond was yielding 7.3 percent on Monday, according to HSBC Middle East prices quoted on Bloomberg.

Ras al-Khaimah has an ‘A’ credit rating from Standard & Poor’s, its sixth-highest investment grade, and an equivalent rating from Fitch Ratings.

Back in February S&P credit analyst Farouk Soussa said: "The ratings on RAK rest primarily on ongoing support from the federal government of the UAE and the likelihood of extraordinary support in the event of financial stress."

Soussa added: "The federal government, funded mostly by Abu Dhabi and underpinned by that emirate's oil wealth, meets almost all the current expenditure costs of the seven emirates that make up the UAE, while major capital costs are also borne at the federal level."

''Individual emirates, including RAK, have limited fiscal obligations - primarily related to local infrastructure and services and capital spending to develop emirate-level projects - and consequently substantial fiscal flexibility.''

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