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Mon 12 Dec 2011 04:02 PM

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Nakheel says profit payment for $1.03bn bond on time

Sukuk is part of state-owned developers debt restructuring deal with trade creditors

Nakheel says profit payment for $1.03bn bond on time
Palm developer Nakheel narrowly avoided a sukuk default in 2009

Troubled Dubai developer Nakheel said on Monday that the
profit payment of 10 percent on its $1.03bn sukuk issued earlier this year
would be made on time.

The Islamic bond, or sukuk, is part of Nakheel's $16bn debt
restructuring deal which repays trade creditors 40 percent in cash and 60
percent via the bond.

Nakheel said all arrangements have been made to ensure that
Deutsche Bank, the arranger of the sukuk, can make the payments. The payment in
due on Dec 15.

The developer, which built man-made islands shaped like
palms and a map of the world, said earlier this month that it posted a profit
of AED526m ($143m) in the six months to June.

Nakheel was absorbed by the Dubai government earlier this
year as part of its former parent Dubai World's restructuring agreement.

It narrowly avoided a 2009 sukuk default after Abu Dhabi
stepped in with a last-minute lifeline. Two other Nakheel sukuk, which matured
in 2010 and 2011, were paid in full by Dubai.

"Nakheel is pleased to confirm that the profit payment
of 10 percent due on 15 December 2011, on the trade creditor sukuk issued in
late August this year, will be paid on time," Nakheel said in the

The sukuk is trading at a deep discount to par reflecting
weak investor demand
and is indicative of the risks relating to full and timely

It was bid at a cash price of 73.125 on Monday afternoon, to
yield nearly 19 percent, according to Thomson Reuters data. The bond was issued
at a price of 100.00.