The Government of Ras al Khaimah is offering to buy back up to Dh2.2 billion (US$599 million) of debt in a bid to extend repayment of its borrowings and better co-ordinate its issuance of bonds and other debt.
The move comes as governments and companies across the Gulf vie to refinance old debts and push forward maturities to avoid a repeat of Dubai's debt crisis.
The offer, disclosed yesterday on the website of NASDAQ Dubai, will allow investors in $325m of Islamic bonds maturing in 2012 to either sell them for cash to the Ras al Khaimah Government's Investment and Development Office (IDO)or exchange them for new bonds issued by RAK Capital that mature in 2016.
In a separate move, the IDO is offering to buy back shares of a Dh1bn bond issued by RAK Capital that comes due in 2013. There is currently no exchange option attached to that offer.
"The rationale for the offers Ö is to utilise certain surplus cash resources, to extend the maturity profile of certain outstanding indebtedness of the Government of the emirate of Ras al Khaimah, and to consolidate its sovereign issuance within RAK Capital as issuing entity," the NASDAQ Dubai statement said.
RAK Capital is a vehicle incorporated in the Cayman Islands for the sole purpose of issuing government bonds. Government representatives could not be reached for comment yesterday.
A meeting of holders of the Islamic bond that comes due in 2012 - a chunk of debt issued by the Ras al Khaimah Investment Authority (RAKIA) in 2007 - is scheduled for December 8 to vote on whether to allow the redemption of all the bonds. If the resolution is passed with a 75 per cent majority, holders of that debt are to be repaid at face value plus all accrued gains and a 2 per cent premium.
RAKIA is the Government's main investment vehicle and has interests ranging from property projects to transportation and energy. It also runs the emirate's economic free zones and works to attract foreign companies to them. While it did not elaborate on its reasons for extending the maturity of debts, turmoil in the property market has been a major concern for the Government, which is behind a large number of projects in the emirate.