Sources say June deadline for sukuk too ambitious; bond is part of $10.9bn debt revamp
Dubai World's property arm Nakheel has delayed offering an
Islamic bond, or sukuk, until July as part of its $10.9bn debt restructuring
plan, two sources familiar with the matter said.
The developer, which overstretched itself with projects such
as islands in the shape of palm trees, had previously said it expected its debt
restructuring process, including the sukuk issue, to be completed by the end of
the first half of 2011.
"The end of June was always an ambitious goal,"
one of the sources said, speaking on the condition of anonymity.
"This is a very complicated transaction, involving lots
of individual negotiations and dealings with multiple trade creditors. The
sukuk will be issued in July."
Both sources said the delay was largely administrative.
Nakheel said in an emailed statement that it had achieved
the "agreed threshold" of trade creditors that are eligible for
receiving the sukuk.
"Nakheel is making good progress on the restructuring
process with the aim to completing the restructuring soon."
Under Nakheel's restructuring proposal, trade creditors
would receive repayment through 40 percent cash and 60 percent in the form of a
$1.63bn Islamic bond.
The company said Sunday it had paid AED5bn ($1.36bn) in
overdue payments to its trade creditors.
The developer, which is also negotiating a debt deal with
its financial creditors, said earlier in June it had secured over 98 percent approval
for the plan from banks.
The developer's inability to meet its debt obligations, in
the wake of a property collapse and the global credit crunch, helped trigger
Dubai's debt crisis in 2009.
The planned sukuk was already being offered at a discount in
the secondary market by trade creditors.
Earlier this month, chief executive Chris O'Donnell left
after ending a five-year contract.
Sadly for trade creditors a highly predictable delay. there are money issues across a number of state businesses and raising the odd cash generating bond here and there just adds to the state debt. A leak to this effect from insider sources is the oldest buying time spin doctor tactic in the book.
Also there are still cases before the Dubai World Tribunal and Nakheel has only paid a further $110 million against the 40% cash it owes its trade creditors since March 29th 2011. I assume that the assembly value of collateral developments to back the 60 per cent trade creditor debt bond is still under discussion, as there is no government backed guarantee apparent.
Does one assume therefore that the announced restart of semi completed works like Jumeirah Golf Estates infrastructure will be delayed again.