The Government of Ras al Khaimah is offering to buy back up to Dh2.2 billion 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 GCC vie to refinance old debts and extend maturities to avoid a repeat of Dubai's debt crisis last year.
The offer, disclosed today on the website of the Nasdaq Dubai, will allow investors in $325 million 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 a Dh1bn bond issued by RAK Capital that comes due in 2013.
"The rationale for the offers … 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.
A meeting of holders of the Islamic bond that comes due in 2012 - debt issued by the Ras al Khaimah Investment Authority - has been scheduled for December 8 to vote on whether to allow the redemption of all the bonds and dissolve the operation. Holders of that sukuk are to be repaid at face value plus all accrued profit payments and a two per cent premium for the early redemption.
The price investors in the 2013 bond are to receive will be announced next month, the Government said. It will not be less than the face value of the debt.
Recent buoyancy in global credit markets has helped refinancing and fund-raising efforts in the Gulf, giving impetus to issues by the Dubai Government and companies including Emaar Properties, the Dubai Electricity and Water Authority and the International Petroleum Investment Company in Abu Dhabi, among others.
Governments are also trying to coordinate their debts and those of the companies they own. Dubai, Abu Dhabi and the Federal Government have all established debt management offices in the past two years in an attempt to keep better tabs on levels of borrowing.