Nakheel to delay bond to trade creditors

Sources say June deadline for sukuk too ambitious; bond is part of $10.9bn debt revamp
Nakheel to delay bond to trade creditors
Nakheel has paid $1.36bn in overdue payments to its trade creditors
By Reuters
Wed 22 Jun 2011 07:43 AM

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.

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