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.
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