Nakheel's $11bn restructuring seen favouring lenders

  • Share via facebook
  • Tweet this
  • Bookmark and Share
BOND ISSUE Another source close to the sukuk issue said Nakheel will probably start to deliver its sukuk certificates by early May (Getty Images)

BOND ISSUE Another source close to the sukuk issue said Nakheel will probably start to deliver its sukuk certificates by early May (Getty Images)

Developer Nakheel, restructuring $10.9bn in debt, has offered lenders repayment after four and a half years at a rate of 4 percent on part of its debt in a deal that favours banks, sources said.

The terms of the restructuring, covering mainly bilateral loans and one $1.85bn syndicated Islamic loan due 2012, vary from the all-lender meeting in July which indicated repayment over five to seven years.

 They relate to the syndicated loan, signed in 2007, which about 22 banks participated in, one of the sources said, and an agreement could be close. Nakheel said in March it hoped to conclude its restructuring by the end of the second quarter.

Another source, at a creditor bank who has seen the terms sheet, said the same terms would apply across some of the other facilities under the restructuring.

"The terms should be pretty commercial. I think the way things are going, it’s pretty close to a resolution," the source at one of Nakheel's lenders said.

"A document is currently under circulation. There are various facilities. But the tenor is 4.5 years on the facilities. The interest rate is LIBOR (London interbank offered rate) plus 4 percent," the source said, adding banks had come out on top.

The syndicated loan was the only facility initially expected to be repaid after seven years. Other facilities had a five-year term.

Nakheel declined to comment when contacted by Reuters.

Local banks are thought to be the major lenders to Nakheel, and a large part of the company's borrowings have been in dirhams, so a commercial rate of interest favours UAE banks which lend according to the Emirates interbank lending rate.

"Most of the local banks contribute in dirhams so their cost of funding is higher. They would need to get more than the current rate of EIBOR to match their cost of funding," said one Gulf-based banking source.

"Plus, they'll want to support their local banks."

The company's coordinating committee is made up of National Bank of Abu Dhabi, Dubai Islamic Bank and Barclays Capital.

Nakheel, which overstretched itself building islands in the shape of palms and other ambitious projects, is part of state-owned Dubai World which recently completed a $25 billion restructuring with banks.

Nakheel held separate debt talks with its bank and trade creditors and will eventually be separated from Dubai World to become a full government subsidiary.

An agreement with trade creditors - expected to get 60 percent repayment in the form of Islamic bond, or sukuk, certificates carrying an interest rate of 10 percent, and 40 percent repayment in cash - is also thought to be close.

At the end of last year, Nakheel disclosed that 91 percent of trade creditors had agreed to the debt deal, but the plan needs 95 percent approval to be implemented.

Sources indicated the company was close to the required percentage, and had now been sent the restructuring terms.

"The restructuring agreements for trade creditors have been sent out at the end of March. Under the agreement, creditors must appoint a bank as custodian and that is currently being put in place," said one source working closely with the creditors.

"The terms are pretty much as anticipated. They are just going over a few issues... details."

Another source close to the sukuk issue said Nakheel will probably start to deliver its sukuk certificates by early May.

UK lender HSBC indicated earlier this week that it would waive custody fees for six months for trade creditors who want to take delivery of the "forthcoming" sukuk certificates.

Related:
Topics
Companies
Join the Discussion

Disclaimer:The view expressed here by our readers are not necessarily shared by Arabian Business, its employees, sponsors or its advertisers.

Please post responsibly. Commenter Rules

Posted by: Jag

The banks get paid...... the creditors get paid........it's only the investors who were stupid enough to trust Nakheel who get nothing........except the option of loosing 50% in a credit note or 'consolidation' by swapping with property that Nakheel is offering at double the market rate or wait for 5 years to get their money back........ without any interest !!!

Enter the words above: Enter the numbers you hear:

All comments are subject to approval before appearing

Further reading

Features & Analysis
Women edge into Gulf boardrooms as economies, societies shift

Women edge into Gulf boardrooms as economies, societies shift

Amina al-Rustamani, CEO of TECOM Investments, is leading the...

1
Dubai mulls rule change to lure more domiciled funds

Dubai mulls rule change to lure more domiciled funds

Proposed rules would create a new class of funds in the Dubai...

Gulf's rift over Qatar may slow investment, reforms

Gulf's rift over Qatar may slow investment, reforms

Analysts suggest dispute may not hurt immediately but could impact...

Most Discussed
  • 15
    Germany puzzled as UAE think tank ordered to close

    Matt, your words sound kind of funny given the role the Britain has played in this region for so many decades.
    And given the democratic tradition that... more

    Thursday, 17 April 2014 7:10 PM - one of the joes
  • 10
    UAE father who whipped son to death wins appeal

    "Under Sharia, a parent cannot be executed for killing their child"
    A spouse could be executed if he/she kills his/her spouse, as none of them is... more

    Friday, 18 April 2014 3:38 PM - Nihar
  • 3
    To diet or not to diet?

    It is best to eat by your blood type. Following this diet is miraculous. Generic diets don't always work as certain foods are not good for the individual... more

    Friday, 18 April 2014 11:49 AM - Shamira Mitha
  • 54
    Three UAE women attacked with hammer at London hotel

    I really feel that Arabian Business.Com should now close this comments page. This should be all about sympathy for the families not what it is/has turned... more

    Wednesday, 16 April 2014 1:06 PM - Adrienne
  • 51
    Why Dubai isn't a plastic city

    What is definitely not a plastic city. The Arabs have a culture dating back to several centuries. 50 years back Dubai was just a fishing village. Today... more

    Tuesday, 8 April 2014 3:49 PM - P. MADHUSUDAN
  • 48
    DMCC boss Ahmed Bin Sulayem entertains Robert Mugabe in Dubai

    @fga ''However today, simply because he decided to dispossess a few white farmers of their land and redistribute to the poorer indigenous blacks'' more

    Sunday, 13 April 2014 3:02 PM - Matt Williams