Nakheel is moving closer to a deal with builders owed billions of dollars by the developer, as the company said yesterday it would start paying its bills once it secured creditor's consent on 65 per cent of claims. The announcement comes a month after its parent company, Dubai World, disclosed plans to inject US$8 billion (Dh29.38bn) of capital into Nakheel as part of its $24.8bn debt restructuring plan.
Nakheel, the developer of Dubai's Palm islands, said some trade creditors had signed settlements presented to them last week but the company did not disclose what share of the claims those consents represent. Last month, Nakheel was offered $8bn of fresh funds from the Dubai Financial Support Fund, which also proposed to turn $1.2bn of debt into equity in Nakheel. Part of this was to go towards paying contractors, to speed up completion of projects that had been put on hold.
"This brings us yet another step closer to continuing work on our near-term projects and delivering on our commitments to our customers," Nakheel said. Under the plan, trade creditors are being offered 100 per cent of their agreed claims, 40 per cent in cash and 60 per cent in the form of a publicly tradable security paying 10 per cent a year. The cash payment will be made as soon as the consent target is reached, Nakheel said. "This is expected to be achieved in the very near future. All indications suggest that this will be a prompt process."
The developer has been meeting with contractors over the past week. Contractors involved in the process have said the developer owes about 1,200 companies, half of which are due more than Dh500,000. Nakheel declined to answer questions. Riad Kamal, the chief executive of Arabtec Holding, which stopped work in January on its Dh2.99bn contract to build 1,500 homes at Nakheel's Al Furjan villa community, said the company was "in the process" of signing the agreement and expected the bills to be paid early next month.
Mr Kamal hoped to resume work on Al Furjan shortly after. "We can't complain, as long as we get what we are promised," he said. Halcrow, the UK engineering firm, met officials at Nakheel yesterday but is yet to sign an agreement. "It's encouraging that there's some action out there in the marketplace but we're still trying to look at all the detail," said David Yaw, the regional managing director of Halcrow.
Nidal Khoury, the vice president of the piling firm NSCC, said the company was happy with the offer "in principle", but said it could be another two or three weeks before anything is signed. Other contractors owed more than Dh500,000 by Nakheel were reluctant to agree to the deal. "The meetings were just to formalise the 40/60 per cent payment plan, which is only against money certified by Nakheel up until the end of November last year," said a senior manager at a contracting firm that worked on Waterfront.