Nakheel has reached an agreement with 75 per cent of its trade creditors and has pledged to settle Dh4 billion (US$1.08bn) of claims within two weeks. The Dubai World-owned developer of the Palm islands also intends to restart construction on six of its stalled projects within months and hopes to reach a final deal with its lenders by the middle of this month, Ali Rashid Ahmed Lootah, the chairman of the company, said yesterday.
"As of today, we have started 40 per cent cash payments as per company's restructuring plan to trade creditors. The payments will be transferred to their accounts within two weeks," he said. The developer is confident it will secure agreement from the remaining 25 per cent of the creditors soon. "It is just a matter of reaching them. We are dealing with 1,000 trade creditors and it's hard work, but we expect to be up to date with all our payments in July," Mr Lootah said.
Nakheel has started paying its smaller creditors, those that are owed Dh500,000 or less, as part of a wide-ranging offer made to creditors in March when the Dubai Government said it would pump $8bn into the developer. Dubai World, one of the emirate's three main state-owned business groups, on May 20 reached an agreement with a group of creditors to restructure $23.5bn of liabilities. Nakheel has offered trade creditors such as suppliers, contractors and subcontractors 40 per cent in cash and 60 per cent in the form of tradable securities, with a 10 per cent yearly return.
Nakheel needed to secure the approval of 65 per cent of its trade creditors to start paying its major creditors under the terms of the offer. The developer, which is restructuring $10.5bn of debt, also needs to have 95 per cent of all its trade creditors on board before it can initiate the second phase of payments in the form of tradable securities, which Mr Lootah said would "happen soon". He said the next major step would be the settlement of creditor claims related to Nakheel's various construction, consultancy, supply and other contracts.
Nakheel and Emaar Properties, the developer of world's tallest tower, had spearheaded Dubai's six-year building boom, which ended abruptly in the autumn of 2008 when property prices began to tumble. Highly leveraged Nakheel was forced to put a number of its projects on hold as it cut its workforce from more than 3,800 to just over 1,000. Now the developer hopes to restart work on Jumeirah Park, Al Furjan, Jumeirah Village, Jumeirah Islands Mansions, Jumeirah Heights Clusters and Al Badrah. Negotiations with contractors to resume the projects after outstanding payments have been settled, Mr Lootah said.
At the end of June last year, the most recent date for which Nakheel's financial results are available, the company had unpaid bills of Dh28.6bn. Mr Lootah declined to say how much of the $8bn committed by the Government had been used. He said Nakheel was drawing cash on an "as and when needed basis". skhan@thenational.ae
