Nakheel may receive more funds from Dubai's $10bn bond

Developer may get help to repay $3.52bn Islamic bond by Dec - gov't official. 
By Joanna Hartley
Sun 17 May 2009 07:52 AM

Nakheel could be inline for extra financial help from the Dubai government later this year as part of plans to repay a $3.52bn (AED21.9bn) Islamic bond, a senior government official has revealed.Nasser Al Sheikh, director general of Dubai’s Department of Finance, confirmed that the developer’s outstanding Islamic bond fit criteria for funding under the government’s $10bn bond scheme, which was launched in February.

"There is a criterion that has to be met, and if that happens we will support any government-related entity," he said in an interview with UAE daily Gulf News, on the sidelines of the World Economic Forum at the Dead Sea, Jordan, on Saturday.

He added that Nakheel's sukuk bond, due in December, fit the criteria.

The government would lend more from its support fund if a company's "business model is sustainable and if its cash flow supports the interest payment and there is a repayment plan for the principal”, Sheikh said.

His comments follow an admission by Nakheel earlier this month to Standard & Poor’s that it may restructure the bond before it matures.

This prompted the ratings agency to review the credit ratings of a host of government linked companies.

Nakheel has already received loans through the bond scheme to help it with liquidity problems due to a slowdown in Dubai’s the real estate sector, which has seen house prices fall by up to 50 percent in some parts of the emirate.

Last month Sheikh confirmed that more than 50 percent ($5bn) of the bond had already been distributed to government-related entities by the UAE Central Bank, which bought-up the entire bond.

The $10bn is the first phase of a $20bn medium to long term note, with the second $10bn due to be released by the end of the year.  

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