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Wed 14 Jul 2010 10:50 PM

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Nakheel plans loan repayment over 5-7 years

Bankers stress that seperate interest rates would apply to seperate loans.

Nakheel plans loan repayment over 5-7 years
LOAN REPAYMENT: Dubais Nakheel asked bank creditors to accept repayment of $10.5bn over five to seven years. (Getty Images)

Troubled Dubai property developer Nakheel asked bank creditors to accept repayment of $10.5 billion over five to seven years at a meeting on Wednesday in one of the lavish developments that brought it low.

Detailed terms of the multi billion dollar restructuring, including the rates of interest and repayment schedules for the syndicated and bilateral loans, were presented to bankers who were asked to respond to the proposals by Aug 31.

The details were not disclosed publicly by Nakheel. Two bankers present at the meeting said one rate proposed was 4 percent, but both stressed that separate rates would apply to separate loans.

Two other sources familiar with the matter said the repayment periods ranged between five and seven years.

One said: "Each facility has its own deal. They are individually negotiating terms of each facility with the coordinating committee. You can't put one number on it but they will likely have similar terms."

A company statement said the terms had unanimous approval by the three bank coordinating committee, "subject to further internal approvals", and that Nakheel expects the restructuring to be completed over the coming months.

Another banker at the meeting said: "They gave us some guidelines on what they can do, which we will now look into. It looks overall quite optimistic."

The developer, which overstretched itself building islands in the shape of palms and other ambitious real estate, is holding separate restructuring talks from those put in place by its equally troubled parent, state controlled conglomerate Dubai World.

Nakheel made a presentation to some 20 creditor banks at the Atlantis Hotel, a lavish pink palace perched at the seaward tip of its landmark Palm Jumeirah island development.

Other Nakheel projects include a set of man made islands in the shape of the world off the coast of Dubai, which is home to the world's tallest building.

In recent years the company was noted for its breakneck pace of development, which came to an abrupt halt in 2008.

Nakheel's talks centre on one syndicated loan worth $1.8 billion and an unknown number of bilateral ones.

Its coordinating committee is made up of Barclays Capital, National Bank of Abu Dhabi and Dubai Islamic Bank.

Dubai World is working at the same time to restructure $23.5 billion of its own debt. Its plan has also won the approval of its core lenders and it will put it before the entire group of banks on July 22.

Nakheel - which has repaid two Islamic bonds worth $5 billion since Dubai shocked markets with a plan to delay debt repayments last November - is also in separate talks with its trade creditors and has begun making cash payments to them under a plan unveiled by Dubai in May.

The trade creditor plan offers full repayment, with 40 percent in cash and the rest via an Islamic bond, or sukuk, which has a 10 percent annual return.

Analysts see some potential friction in the disparity between the treatment of the two creditor groups.

Andre Andrijanovs, corporate analyst at London based distressed debt firm Exotix Limited. "The offer to trade creditors is still better as they get a mix of cash and a bond with a higher interest rate than what is being offered to banks."

He added: "They (banks) do not have much of a choice. The negotiation margin is very low. Overall, the banks are likely to accept the offer."

Bank lenders are being advised by KPMG and law firm Allen and Overy. (Reuters)

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