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
By Staff writer
Sun 04 Sep 2011 09:36 AM

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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