Nakheel says paid out nearly $2bn to trade creditors

News comes days after state-owned developer posted H1 profit of $143m on handovers
Nakheel says paid out nearly $2bn to trade creditors
Nakheel is paying trade creditors through a combination of cash and Islamic bonds
By Shane McGinley
Thu 08 Dec 2011 06:19 PM

Indebted developer Nakheel, whose ambitious real estate
projects spurred Dubai’s debt crisis, has paid nearly $2bn in overdue payments
to its trade creditors, the company said Thursday.

Nakheel, which on Monday reported a first half net profit of
AED526m ($143m)
, said the payments marked “significant progress” in its recapitalization

“Nakheel has to date made payments of AED 7.3bn ($1.987bn)
to its trade creditors,” the company said in an emailed statement. This followed
on from “initial payments to trade creditors of AED500,000 or less, which
commenced in March 2010,” Nakheel said.

Nakheel was at the centre of Dubai's property collapse in 2008
when house prices plunged by more than 60 percent, forcing many developers to
abandon projects.

The developer wrote off up to
AED78.6bn ($21.4bn) of its real estate assets due to the crisis, according to a
bond prospectus released earlier this year.

Some of its projects, including Nakheel’s Waterfront
and Jebel Ali development, are yet to complete.

Under Nakheel's $16.1bn restructuring deal, trade creditors received
repayment through 40 percent cash and 60 percent in the form of an Islamic
bond, or sukuk.

The developer issued Islamic bonds to its contractors and
suppliers in August, and is due to issue another AED1bn of bonds by the end of
the year.

Nakheel said Monday that revenues stood at AED1.5bn for the
six months to June, mainly driven by the handover of development properties in
a number of stalled Nakheel projects.

Cost cuts also reduced overheads by AED 131m compared to the
same period in 2010, the company said.  

Dubai saw less than 1,700 real estate deals in the first ten
months of the year, data from Dubai Land Department showed in November. Some
1,603 deals were signed off in the ten months to October, down from 5,363 during
the same period in 2008.

But the figures reflect a 37 percent increase in property
transactions when compared to 2009 at the height of the financial crisis,
suggesting fledgling signs of recovery that may be linked to the wave of Arab
Spring unrest that has rocked economies in the region.

House prices showed signs of recovery in the third quarter,
with slight rises in prime projects such as Palm Jumeirah and Arabian Ranches,
Jones Lang LaSalle said in September.

But analysts remain concerned that the estimated 33,000 new
homes scheduled to hit Dubai’s market by end-2012 could cause fresh declines in
rental and sale prices.

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