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Wed 30 Jun 2010 12:56 PM

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Dubai's Nakheel starts cash payments to creditors

Dubai World-owned property company seeks to restructure $10.5bn of liabilities.

Dubai's Nakheel starts cash payments to creditors

Nakheel started cash payments to trade creditors as the Dubai World-owned property company seeks to restructure $10.5bn of liabilities after real- estate prices slumped in the emirate.

Nakheel started making “40 percent cash payment to our trade creditors,” according to a company statement on Wednesday. “The announcement marks significant progress in our recapitalization plan following on from the initial payments to trade creditors of 500,000 dirhams or less which commenced in March.”

Nakheel, the builder of palm-shaped islands off Dubai’s coast, said in March that trade creditors would be offered 100 percent recovery of their claims - 40 percent through a cash payment and 60 percent through a publicly tradable Islamic bond, paying 10 percent return annually. The Dubai government in March pledged to pump $8 billion into Nakheel, and will take over its ownership from Dubai World after the restructuring is complete.

Nakheel along with Emaar Properties PJSC, another state- controlled developer, spearheaded a building boom in Dubai after the emirate allowed foreigners to buy property in some areas. The boom turned to bust as global credit conditions tightened and speculators fled the market.

The company’s $750 million fixed-rate Islamic notes rose 0.95 cents to 106.7 cents on the dollar at 12:25 p.m. in Dubai, according to Bloomberg composite bond trader prices. The notes have more than doubled since reaching a low on Feb. 17.

Dubai World, one of the emirate’s three main state-owned business groups, on May 20 reached an agreement with a group of creditors to restructure $23.5 billion of liabilities. The holding company’s announcement on Nov. 25 that it would seek to delay repaying loans sparked a plunge in developing-nation stocks and the largest increase in emerging-market bond yields over U.S. Treasuries in four weeks. The cost to protect against a default by Dubai doubled.

Nakheel paid a 3.6 billion-dirham ($980 million) Islamic bond maturing in May. Dubai avoided a default in December on $4.1 billion of payments due for Nakheel’s 2009 bond after Abu Dhabi and two of its state-owned banks provided $10 billion.

Nakheel’s plans include residential islands shaped like a world map and a coastal development that would be twice the size of Hong Kong Island. The company in March said it will offer finished properties or securities to customers who purchased units in developments that won’t be completed. Its website still contains descriptions of planned or incomplete projects including palm islands and Dubai Waterfront, which could accommodate almost all of Dubai’s current population.

The Dubai government and its state-owned companies have racked up $109.3 billion of debt, according to International Monetary Fund estimates, as the emirate sought to transform itself into a tourism, trade and financial services hub. About $15.5 billion of that is due this year, the IMF said.

Debt restructuring by Dubai state-run companies may almost double to $46.7 billion as more of the emirate’s businesses may need help making payments, Morgan Stanley said in a report in December. Dubai Holding LLC, Dubai Holding Commercial Operations Group LLC, Borse Dubai Ltd. and Dubai Sukuk Center Ltd. may join Dubai World in restructuring debt, Morgan Stanley said.

Dubai Holding and its units owe banks $12 billion and have begun talks to roll over some loans, a person with knowledge of the matter said May 10. Almost three-fourths of the loans were to Dubai Holding’s two investment companies, Dubai Group LLC and Dubai International Capital LLC, said the person.

Dubai International Capital, the fund owned by Dubai’s ruler Sheikh Mohammed Bin Rashid al-Maktoum, sought a three- month extension on some of its loan payments in May. The company has $1.25 billion loan due this month.

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ali 10 years ago

I guess this one news has been re-written a million times, just by posting ld news in new words will not change anything, if your looking to do some PR work then i suggest you write about some new projects which have been started or investors who have got their money or apartments/ villas.