Dubai’s Nakheel says trade claims slashed by 85%

Indebted Palm developer previously said contractors “always exaggerate” claims, which also "exceed reasonable amounts"
Dubai’s Nakheel says trade claims slashed by 85%
Nakheel chairman Ali Rashid Lootah.
By Staff writer
Mon 06 Aug 2012 10:43 AM

Nakheel has negotiated to reduce the amount it will pay out in trade creditor claims by around 85 percent, a spokesperson from the government-owned Dubai developer told Arabian Business.

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 three quarters.

“Nakheel is professionally and amicably settling claims made by trade creditors, many of which exceed reasonable amounts. In doing this, we have engaged external independent claims consultants and external legal advisors to ensure that settlements are reasonable to both parties,” a spokesperson told Arabian Business.

“Up to now, the settlements on claims have averaged around 15 percent of the original claims made by contractors. We expect similar settlement figures for the remaining claims.

“Nakheel, by engaging external advisors, has undertaken the most transparent and fair approach to settlement of trade creditor claims in the market. Nakheel’s approach favours amicable settlement. Parties who are not able to reach amicable settlement with Nakheel retain the option of their contractual right to pursue arbitration,” the statement added.

Nakheel chairman Ali Rashid Lootah last year said contractors “always exaggerate” their claims and negotiations were a standard part of the industry.

“People claim one million and at the end of day, after you analyse the claim and renegotiate… [and you agree an amount],” he said.

Speaking to Gulf Business magazine this week, Lootah said the firm had settled AED3bn (US$817m) out of a total claim of AED8bn from creditors. He added that he expects to lower the value of the remaining invoices to approximately AED1bn.

"The remaining big boys, they put the big figures, but we're confident it will be about the same [reduction]," Lootah said. "We expect to bring it down to not exceeding AED1bn total. We're patient. I'm not in a hurry to pay - if they want to settle, they have to be reasonable."

Nakheel, whose extravagant developments at the height of Dubai's property boom contributed to the emirate's debt woes, has been slowly recovering from the crippling real estate collapse.

Earlier this month, the state-owned developer said its first-half profits jumped 36 percent, buoyed by property handovers on several projects.

The developer reported net profit was AED767m (US$208.82m) in the first six months of the year, up from AED562m in the year-ago period.

Revenues rose to AED3.1bn in the first half, up 112 percent from the corresponding period a year ago, it said in a statement.

It said in August 2011 it was restructuring some AED59bn of liabilities, including AED32bn to Dubai government, AED19bn to trade creditors and AED8bn to banks.

As part of the restructuring, the company, which was previously the property arm of Dubai World, is now controlled by the Dubai government, along with another debt-ridden property firm Limitless.

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