Nakheel says slashed ‘exaggerated’ trade claims by 75%

State-backed Dubai property developer has yet to list first tranche of AED4.8bn Islamic bond

Nakheel said it is restructuring some AED59bn ($16.1bn) of liabilities, including AED32bn to Dubai government

Nakheel said it is restructuring some AED59bn ($16.1bn) of liabilities, including AED32bn to Dubai government

Nakheel, the Dubai developer seeking to restructure AED59bn ($16.1bn) of liabilities, said it had slashed the value of “exaggerated” contractor claims against it by 75 percent.

The firm, which overstretched itself building islands in the shape of palms and other ambitious projects, said negotiations had seen the value of trade debts fall by more than two thirds.

“You know contractors, they always exaggerate,” said chairman Ali Rashid Lootah. “People claim one million and at the end of day, after you analyse the claim and renegotiate… you agree an amount and we managed to successfully achieve 75 percent saving on contractor claims.”

Nakheel had on Sunday yet to list the first tranche of its twice-delayed AED4.8bn Islamic bond on the Nasdaq Dubai, after starting to issuing it to trade creditors on Aug 25.

The company offered trade creditors repayment of 40 percent cash and the remaining 60 percent in the form of an Islamic bond, or sukuk, at a profit rate of 10 percent.

The Islamic bond will not be backed by the government but by Nakheel's assets, the chairman said, adding no assets had yet been sold as part of the restructuring.

Dubai has already given as much as $8.71bn to the developer. The company, which was previously the property arm of Dubai World, will now be controlled by the Dubai government along with another debt ridden property firm Limitless, that is restructuring a $1.2bn loan.

Nakheel said in August it would handover 7,982 homes in Dubai by December 2012, in projects including Jumeirah Islands, Al Furjan as well as Badrah and Veneto in the Waterfront project.

[To see Nakheel's schedule for its short-term projects, check here]

The indebted developer also confirmed plans to build new villas on Palm Jumeirah to accommodate a rise in demand, and to begin work on a dedicated mall for the offshore island.

 “We are reviewing-  and hopefully before the end of year, after doing internal evaluations-  the Palm Jumeirah Mall, which is going be an added value to Palm Jumeirah and the rest of the area,” Lootah said. “And also hopefully we will be launching new villas on Palm Jumeirah and will go out for engineering very shortly.

“We are seeing transactions are increasing and there is high demand and that has encouraged us.”

Nakheel was one of the biggest casualties of Dubai’s real estate crash, suspending at least 100 projects in the wake of a property collapse that more than halved house prices in the emirate.

Nakheel said Aug 24 it was restructuring some AED59bn of liabilities, including AED32bn to Dubai government, AED19bn to trade creditors and AED8bn to banks.

The company claimed it had settled about 60 percent of liabilities linked to buyers in its stalled real estate projects, representing about AED10bn ($2.72bn), by offering investors homes in completed Nakheel projects or a credit switch to another investor or project

 “Our liability on the long-term projects is approximately AED10bn and we’ve managed to solve and find and accommodate people for a value of AED6bn in 1.5 years,” said Lootah.

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Posted by: Red Snapper

And still no sign of the Trade Creditors 60 per cent outstanding balance settlement sukuk being listed. That means that for those TC's wishing to trade their paper for cash, it still has no value.

Mega-value high profile law suits mounting at the Dubai World Tribunal in tandem, does that affect the assets, certainly in instances cases the land bank? Stock markets volatile everywhere, sadly perhaps not the best time to list a bond?

Posted by: Telcoguy

I had dinner with a professor from my business school. They have discoveered how Accounts Receivable are used as a negotiation tool by a client whom should not be named (if I want this published)
They are certainly shocked, I pointed that "this you do not learn at school" and he reluctantly agreed.
Obviously the matter will not be discussed here, but it will not help to the reputation of this region outside. All this for less than 3M US$
Doing business here is not like doing business back home, eventually this attitude will translate into being able to reach only second, third or worst tier contractors as people will talk (you can not censor them outside UAE) and share experiences.

Posted by: Andy

" You know how contractors are" This is a funny statement, Nakheel negotiated in the "Good Days" everybody under the ground, to get jobs with them, and most contracts were signed by contractors counting on variations.

To "slash" these claims by 75% only shows that signed contracts have no value at all.

Posted by: Red Snappa

It might not be considered in other markets as an overcharge, given that many contractors have had to wait 3 years for payment, which has included an advance of AED 500K in cash followed by 40% of anything owed to them over 500k drip fed in cash, once Nakheel had shaved the base figure in negotiations.

Trade creditors are now faced with a tradable bond for the remaining 60% of their outstanding invoice, which is backed by Nakheel assets, not the Dubai Government for which they either wait for 5 years to mature or try and get some cashflow back into the business by losing 20% off face value on the secondary market.

An Islamic bond which at the moment is not listed, therefore not actually in a position to make the promised 10% return.

Turning a massive screw on both the amount owed and when the trade creditor actually gets paid in terms of YEARS, does not present a very healthy picture of the way the local industry does business.

Posted by: Peter Caltho


I invested and paid for a property in their cancelled Badrah project. Upon asking for a refund, they told me that I would get a 'credit note' which I could sell for 60% of its value !!!

This is how they treat investors and settle claims!!!

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