Bankers to assess Dubai World plan's effectiveness

Aidan Birkett sees Nakheel as vital to Dubai's health, and the developer's creditors will this week give an indication of how persuasive his strategy has been.

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When Aidan Birkett, the chief restructuring officer for Dubai World, began to formulate his plan to put the conglomerate back on the path to financial health, he identified Nakheel as the arch-stone of that strategy. "If you fix Nakheel, you go a long way to fixing the real estate sector; fix the real estate sector and you fix Dubai," Mr Birkett said in March when he unveiled his proposals.

The meeting of Nakheel bank creditors in Dubai on Wednesday will give an indication of how persuasive that strategy has been. The developer has a total of US$10.5 billion (Dh38.56bn) in liabilities, split between bankers, contractors and customers. It has not broken down the total owed to banks but informed estimates put it at about $4bn, spread between about 20 banks. So the all-bank meeting of Nakheel financial creditors will be a smaller affair than Dubai World's 73-bank jamboree next week, although some of the banks overlap, as does the co-ordinating committee membership.

In effect, they are considering the same offer as Dubai World's creditors. So far there have been no dissidents refusing to accept the terms, at least in public. Nakheel customers are being offered consolidation of their investments and new terms of finance for existing properties. The company will deal with them on an individual basis. Contractors and suppliers have been offered 40 per cent of the outstanding liabilities in cash, with the balance in the form of tradable securities.

Trade creditors owed Dh500,000 or less have already begun to receive payments. Ali Rashid Ahmed Lootah, the chairman of Nakheel, said it had reached agreement with 75 per cent of trade creditors, and would settle just over $1bn of claims in a matter of weeks.