Nakheel makes payment on $750 million bond

The property developer has paid a coupon on a $750m bond as its parent Dubai World negotiates with lenders to change terms on about $22bn of debt.

Nakheel, the property developer, has paid a coupon on a US$750 million (Dh2.75 billion) bond as its parent Dubai World negotiates with lenders to change terms on about $22bn of debt. The payment was $10.3m on the bond maturing in 2011, said a Nakheel spokesperson, who declined to be identified. On December 14, Nakheel averted a default by paying $4.1bn on an Islamic bond after Dubai raised $10bn by selling bonds to Abu Dhabi and two state-run banks.

Barclays Capital said investors should sell Nakheel's bonds as Dubai World was likely to offer bondholders recovery values below current levels. Nakheel's 2.75 per cent bond due in January 2011 traded at 60 cents in the dollar in Dubai yesterday afternoon, down from 62 cents in the dollar the day before, according to prices provided by Citigroup. The price has gained 65 per cent since a record low on December 9.

Dubai and its state-owned companies borrowed at least $80bn until 2008 to turn the emirate into a tourism and financial centre. The seizure of debt markets after the onset of the global credit crisis led to a drop of up to 50 per cent in property prices in the emirate, and hampered the ability of Dubai-based companies to raise new loans to refinance debt. "Dubai World's restructuring will ultimately proceed and creditors will - in our view - ultimately have to share some of the burden of its unravelling," Moody's Investors Service said in a report released yesterday.

Dubai will "be preoccupied with the restructuring of its government-related debt portfolio well beyond 2010, as up to $50bn will need to be refinanced over the coming three years", the report said. * Bloomberg