By Archana Narayanan

United Arab Emirates-based National Bank of Ras Al Khaimah (RAKBANK) priced its debut $500 million bond on Tuesday, the latest offer from the UAE as heavy investor demand brings down borrowing costs for Gulf firms.

The lender, rated BBB-plus by Fitch and around 50 percent owned by the government of Ras Al Khaimah, one of the seven emirates in the UAE, attracted orders worth more than $1.5 billion.

The transaction, which has a lifespan of five years, carries a coupon of 3.25 percent and came at a reoffer price of 99.275 and a spread of 160 basis points over mid-swaps, according to a document from lead managers.

The spread was tighter than the initial price thoughts in the area of 170 bps given on Monday.

RAKBANK, the UAE's sixth-largest lender by market value, joins others from the Gulf Arab state in tapping bond markets at a time when borrowing costs have tightened, supported by strong global and local investor demand.

Last week, Emaar Malls Group, a unit of Dubai's largest listed developer Emaar Properties, and telecommunications operator Etisalat completed deals, with the latter pricing the largest ever corporate bond deal by a Gulf corporate at the tightest pricing.

Meanwhile, Abu Dhabi state-owned lender Al Hilal Bank is currently meeting fixed income investors and is expected to issue a capital-boosting Islamic bond next week.

Other Gulf borrowers are also benefiting from the conducive market environment: Commercial Bank of Qatar has attracted orders worth more than four times the $750 million bond size it is aiming to complete later on Tuesday.

While the region is witnessing strong deal flows, bonds sales are expected to taper off in coming weeks, once the holy Muslim fasting month of Ramadan starts at the end of June.

RAKBANK's bond is being issued through the Rakfunding Cayman Ltd special purpose vehicle, with National Bank of Abu Dhabi and Standard Chartered arranging the sale.