Nakheel, the property giant behind Dubai's Palm-shaped islands, returned to profit in the first half of last year after losing Dh76.6 billion (US$20.85bn) in 2009, new documents reveal.
The losses of two years ago - primarily because of write-downs in the value of the company's projects - underscore the toll the property-market downturn took on a company at the centre of Dubai's boom-time development strategy.
The losses also dwarf the profit of Dh58.2 million made in the first six months of last year.
The data was detailed in a prospectus for an Islamic bond Nakheel is issuing as part of a broad plan to settle obligations to a host of creditors.
"This loss was largely attributable to impairments of Dh73.8bn, primarily related to the carrying value of assets and capital work in progress," the prospectus says.
Nakheel declined to comment.
The write-downs, however, came as Nakheel almost halved the value of its assets, which went from Dh155.5bn at the end of 2008 to Dh80bn at the end of the following year. By the end of June last year, Nakheel's assets were worth Dh77.5bn, the prospectus says. Dubai property prices fell by as much as 50 per cent in some areas between the height of the property boom and this year.
The documents also reveal that Nakheel had reduced its workforce by about 74 per cent since October 2008, when it had 3,818 employees. By the end of March this year, Nakheel had just 986 people on the payroll, the prospectus states.
The company has addressed price declines and an oversupply in Dubai's property market by scaling back and prioritising projects, the prospectus shows. It has suspended all its land reclamation projects and is moving forward with a selection of others.
The company is now focusing more on land sales and management of its existing projects.
"Nakheel anticipates that as it completes and delivers projects, its role as developer will gradually be reduced, resulting in its development business becoming more centred on land sales in its role as master developer, and managing its master planned communities," the prospectus says.
Nakheel began restructuring talks in late 2009 when its then-parent, the government-owned conglomerate Dubai World, announced a standstill on debt repayments as it began negotiations with banks.
After the implementation of its restructuring late last month, Nakheel is now owned by the Dubai Financial Support Fund (DFSF), a body set up to distribute $20bn of investment from Abu Dhabi and the UAE Central Bank, the prospectus says.
The DFSF has put Dh26.78bn into Nakheel, the documents say, including injections in late 2009 and last year to pay off a series of Islamic bonds. The DFSF is continuing to assist Nakheel through an Dh8.88bn "ongoing equity contribution", the documents say.
The restructuring has reduced Nakheel's total indebtedness from Dh93.22bn to Dh27.66bn, the prospectus shows. That includes a reduction of bank debt to about Dh8bn and a drop in customer liabilities from Dh33.9bn to Dh7bn. The company's indebtedness was also reduced by the conversion of DFSF cash into equity.
Nakheel is planning to spend Dh7.4bn on its projects this year and Dh1.4bn next year, the prospectus says. The company made Dh200m of capital expenditures in 2009.
The prospectus is connected to an Islamic bond, or sukuk, that is central to Nakheel's settlement with contractors. Contractors, many of whom were unpaid when the restructuring began two years ago, were initially given payments of up to Dh500,000 each to settle their claims. Those owed more than that were to be given 40 per cent of the remainder in cash and 60 per cent in shares in a sukuk that is designed to return 10 per cent a year.
A first tranche of the sukuk was issued last month. The prospectus shows a sukuk programme worth up to Dh8.5bn - a total much higher than the Dh4.8bn Nakheel executives said they were planning to issue. Nakheel is not obligated to issue to the full amount envisaged in the sukuk programme.
