Dubai developer Nakheel completes restructuring

AP News
Posted: Aug 24, 2011 8:16 AM
Dubai developer Nakheel completes restructuring

Nakheel, the indebted state developer behind Dubai's man-made islands, said Wednesday it has completed its long-awaited financial restructuring and will issue $1 billion in Islamic bonds to some of its creditors.

Nakheel's credit-fueled building spree put it at the heart of Dubai's financial meltdown in late 2009, so sorting out its debt pile is key to repairing the city-state's fiscal health. The company was a major component of debt-laden conglomerate Dubai World, but separated from its parent company as part of the restructuring deal.

"This is really closing the old chapter and looking forward, ... and (an opportunity) to re-establish the name of Nakheel," said Chairman Ali Rashid Lootah. "We're starting a new page and delivering (on) our promises."

Nakheel hopes the completion of its restructuring will allow it to focus on building new shopping centers and completing residential projects already under way in the emirate.

Those targets are more modest than the islands in the shape of palm trees and a map of the world that Nakheel tackled in the past. High-end villas, apartments and hotels cover only one of its islands, the Palm Jumeirah. Others sit largely empty.

As part of the restructuring, Nakheel plans to issue 3.8 billion dirhams ($1.04 billion) worth of Islamic bonds, known as sukuk, to its trade creditors on Thursday.

The bonds will carry a high profit rate _ effectively the return on investment _ of 10 percent annually. They will be tradable and backed by an assortment of Nakheel properties, Lootah said.

Nakheel and its parent Dubai World each announced parallel restructuring efforts in March 2010 to tackle more than $35 billion in combined debt.

Dubai World signed a final agreement with its creditors to restructure some $25 billion in debt in March.

Nakheel's process dragged on as it tried to win support not just from bank creditors but also from dozens of trade creditors including contractors and suppliers.

Those trade creditors were offered 40 percent of their claims in cash and the rest in the types of bonds being issued Thursday. Nakheel plans to issue another 1 billion worth of bonds once it gets holdout creditors to sign on to the restructuring plan.