Nakheel to pay $1.3bn in Islamic bonds by June-end

Indebted developer says will be carved out of parent firm Dubai World within weeks
Nakheel’s inability to meet its obligations left it with billions of dirhams in unpaid bills to contractors and suppliers
By Elizabeth Broomhall
Thu 26 May 2011 10:06 AM

Troubled Palm Jumeirah developer Nakheel is to pay its trade
creditors $1.3bn in the form of Islamic bonds by the end of June, in an effort
to settle 60 percent of its debt.

The state-backed property group is reportedly pressing ahead
with procedures to issue the sukuk required to finance its debt restructuring
and separate from conglomerate Dubai World.

Nakheel has said more than 90 percent of trade creditors
have agreed to the restructuring plan, which would see Nakheel pay 40 percent
of its debts in cash, and the remaining 60 percent in the form of sukuk shares
with an annual return of eight percent.

The developer requires 95 percent agreement among its
creditors to finalise the debt deal.

“For the agreement with creditors, we are looking to
finalize by end of second quarter of 2011, [June]” a Nakheel spokesperson told
Arabian Business in an earlier emailed statement. “The sukuk will be concluded
by the end of the quarter.”

In March, the developer said it had made cash payments of
$1.25bn to its trade creditors under its plan to restructure $10.8bn in debt.

The company confirmed in April it had stopped selling real
estate units in Dubai, and has launched an advertising campaign offering
rent-free periods in its lower-priced developments in a bid to boost tenant
numbers.

The developer behind Dubai’s palm-shaped island was the
biggest casualty of the emirate’s real estate crash, halting work on a number
of offplan projects.

Nakheel’s inability to meet its obligations left it with
billions of dirhams in unpaid bills to contractors and suppliers and helped
trigger Dubai’s debt crisis in 2009.

A company spokesperson this month said Nakheel
would be carved out of parent company Dubai World and become a government-owned
entity by June.

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