Nakheel plans to split from Dubai World by June

Indebted developer to issue sukuk to trade creditors by close of second quarter

Nakheel, which overstretched itself building islands in the shape of palms and other ambitious projects, is in the process of splitting from parent conglomerate Dubai World

Nakheel, which overstretched itself building islands in the shape of palms and other ambitious projects, is in the process of splitting from parent conglomerate Dubai World

Nakheel will be carved out of parent company Dubai World and become a government-owned entity by June, when its efforts to restructure $10.8bn in debt will be complete.

"Nakheel separation has not occurred as yet, but will happen once the restructuring is finalised which is due to be completed by June," a company spokesperson told Emirates 24/7.

The indebted developer was at the heart of the debt problems suffered by its parent company Dubai World, which roiled global markets in November 2009 when it asked for a standstill on around $25bn in loans.

Nakheel’s inability to meet its obligations, in the wake of a property collapse and the global credit crunch, left it with billions of dirhams in unpaid bills to contractors and suppliers.

In March, Nakheel said it had paid AED4.6bn ($1.25bn) in overdue payments to trade creditors.

The developer plans to issue around AED5bn in Islamic bonds by the end of the second quarter to contractors and trade creditors.

“The sukuk will be concluded by the end of the second quarter of 2011,” a spokesperson said.

More than 90 percent of trade creditors have agreed to a plan that would see Nakheel pay off its bills through a 40 percent cash payoff with the remaining 60 percent issued in the form of sukuk shares with an annual return of eight percent.

Lawyers in Dubai warned in March that investors and trade creditors may find themselves unable to pursue disputes against Nakheel in the Dubai World tribunal after the split from Dubai World.

Those with outstanding disputes may find themselves in legal limbo if the tribunal – which was set up to hear disputes linked to Dubai World – can no longer rule on cases related to Nakheel.

The developer behind Dubai’s iconic palm-shaped island said in April it had stopped selling real estate units in Dubai in order to focus on offering credit swap options to existing investors.

Nakheel offered credit swaps in the wake of Dubai’s real estate crash, to enable buyers to transfer cash from unfinished or halted developments to completed real estate.

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Posted by: cameron smith

What about unpaid fees to NAKHEEL if one is a property owner. There has been a dispute among owners and Nakheel with their unaudited figures for the last 3 years.. Can the receiver take receipt of the property if an outstanding amount is owed to them?? There are 1000's of owners in that position??

Posted by: JAD

Dubai World is owned by the Government of Dubai so what difference this would make ?? Can someone asnwer me?

Posted by: SAM

What happens when later on Nakheel defaults on the newly issued Sukuk?

Posted by: John Smith

Once this happens the Government will fold Nakheel and everyone with outstanding debts will lose their money. Why else would they do this if this is not their intention.

Posted by: Red Snappa

To be honest the number of court cases reported as being brought against Nakheel in the last 4 weeks has risen so one assumes that June maybe a bumper month for cases brought to the Dubai World Tribunal.

There is another factor to consider, a number of unhappy investors have brought cases against 3rd party developers, who have used Nakheel's failure to enable building certificates by dispute or infrastructure that allow handover of properties to claim 'Force Majeure'. Will Nakheel's transfer to government ownership mean that courts will uphold a 3rd party developer's resort to Force Majeure or not? Particularly pertinent to Jumeirah Golf Estates and Palm Jumeirah Golden Mile.

Also I thought that only repayments to bank and trade creditors would involve a sukuk not refunds to property investors? Off-plan buyers with no chance of a property only get a direct swap to units or a credit note toward a purchase, at completed Nakheel developments, will the government continue this policy?

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