Nakheel offers quicker payment on trade debts for discounts

Easa Saleh Al Gurg Group says state developer still lobbying for cut on debts owed
Nakheel offers quicker payment on trade debts for discounts
(Getty Images)
By Shane McGinley
Sun 21 Nov 2010 09:14 AM

Nakheel, the debt-laden real estate arm of Dubai World, is offering trade creditors early payment on outstanding debts in exchange for a cut on the amount due.

UAE conglomerate Easa Saleh Al Gurg Group, whose industry arm supplies materials to the construction sector, said Nakheel had pushed to renegotiate its debts with trade contractors, in exchange for a quick settlement.

“‘Give us a discount and we will finish your payment upfront,’ that is what [Nakheel] has got to say,” Abdullah Al Gurg, group general manager, told Arabian Business. “In some cases, yes they have [tried to renegotiate debts]. 

Nakheel did not respond to requests for comment on the matter.

State-owned Nakheel said in October about 90 percent of trade creditors had supported a plan on altering the terms of its unpaid bills.

The restructuring offered creditors 40 percent of the money owed to them in cash, with the remaining 60 percent in the form of an Islamic bond or sukuk.

Chris O’Donnell, CEO of Nakheel, said in an interview with Arabian Business last month that the developer expected to secure an agreement by the end of the year.

Nakheel would be paying “pretty much 100 cents in the dollar,” to creditors, he said.

The company had paid AED3.4bn ($0.93bn) in cash payments to trade creditors by September, it said.

A senior executive in a leading UAE construction firm, however, told Arabian Business it was “common practice” for developers in Dubai to lobby for discounts on outstanding debts.

Nakheel’s restructuring plan formed part of Dubai World’s larger proposal to creditors to pay off about $26bn in debt. The developer, which was behind projects such as the Palm Jumeirah and The World, was at the heart of its parent company’s financial troubles, revealed last November when it said it was unable to meet its obligations.

Nakheel has this month restarted work on a number of stalled developments, including Jumeirah Park and Al Furjan. Work has also resumed on Jumeirah Golf Estates, following a cash injection from the Dubai government.

Al Gurg said the news was encouraging to trade creditors awaiting payment.

“For two years we did not see a drop and now we have seen the faucet at least moves in the right direction,” he said.

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