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

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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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Posted by: Dude

I can't see the link between in last statement about trust in financial institutions and Nakeel receiving a fund. Simply the Islamic financing funds real projects and they don't just give the money. They receive a share from the profit of selling the product funded along with repayment for the principle from project cash flow. They don't sell nor manage the project but they monitor the progress and status of the project. So who failed to generate enough cash flow from these projects,The Islamic Institution behind the bond or Nakeel? Clearly it is Nakeel who failed to generate and preserve the cash flow collected from investors and failed to develop projects which are feasible and realistic so they can sell it easily to the wealthy investors.

Posted by: Michael A

On Thusrday it was revealed that Nakheel have sponsered not one but two metro stations which costs in excess of AED200 million over 10 years. Ironically Nakheel is Dubai goverment owned so by Nakheel sponsoring the metro stations the goverment is moving money (which they dont actually have) from one pocket to the other.

Posted by: Sergey

I'm a small investor having just dozen of flats with different developers. Also I have Nakheel's property. After real estate crisis came all my developers started some flexible programs to keep relations with customers -investors: Deyaar reduced prices, Omniyat re-scheduled & postponed payments, Damac consolidated my properties, Emaar offered their finance & reduced maintenance charges. None made Nakheel - everybody in customer service just reject all my applications because of "Nakheel is No1 developer" & all customers should be proud of dealing with Nakheel. But 90% of customers (including me) are not proud & don't want to pay next installments. That's why no money, no cash flow leading to job cuts & putting projects on hold.

Posted by: Greg

Government funds being given to a Government owned company. Does anyone wonder if these "criteria" were tailor made to fit Nakheel's needs? Has any other money from this bond scheme reached any other developer? These ridiculous Nakheel projects are just huge money pits. It's high time we see the end of kitsch designs and projects with insane budgets. The Government should spend it's money on more feasible projects and developers

Posted by: Zia

Lets me just say here to All that it is the middle and lower class that drives the economy of every country and not the higher class. Moreover whatever construction and development happened in Dubai in field of free hold properties had happened with expats money which runs into billions of dollar. In return what did those expats get, depression, job loss, insecurity, some of them even paid in full and after a period of 2 years they still do not have possesion of their properties.

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