Nakheel secures agreement from half its trade creditors

The property developer has secured agreement on 50 per cent of claims totalling US$1.6bn (Dh5.87bn) and is also hiring consultants to speed up the settlement of payments and revive projects.

Nakheel, the indebted property developer owned by Dubai World, has secured agreement on 50 per cent of claims totalling US$1.6bn (Dh5.87bn) from its trade creditors. The company is also hiring consultants to speed up the settlement of payments and revive projects. The Palm islands developer, which is restructuring $10.5bn worth of debt, said last month it would start paying contractors and suppliers once it had secured consent on 65 per cent of claims from creditors.

The move came a month after Dubai World disclosed plans to inject $8bn of fresh capital into Nakheel as part of a $24.8bn debt restructuring. Under the plan, trade creditors are being offered 100 per cent of their agreed claims, comprising a 40 per cent cash payment and 60 per cent in the form of a publicly tradable security with a 10 per cent annual return. "Within a month of presenting its trade creditors with a settlement agreement offering them 100 per cent recovery of agreed claims, Nakheel has secured the agreement of many of its trade creditors, with claims of approximately Dh6bn," Nakheel said.

The developer said it was "very close to reaching the needed agreement for a 40 per cent cash payment to our trade creditors, and yet another step closer to resuming work on our near-term projects and delivering on our commitments to our customers". Some of Nakheel's biggest trade creditors hope deals will be signed off "within days". "We haven't agreed to anything yet … not that we're in disagreement," said David Yaw, the regional managing director of the UK engineering firm Halcrow, which is owed money for a group of medium-sized projects.

"We've had some positive and encouraging discussions but we're still working through the details with them. But I'm talking about [concluding the deal] within days, not months." Riad Kamal, the chairman of Arabtec Holding, said this week the company would conclude its payment agreement with Nakheel early next week, with hopes to resume work on the Al Furjan villa project soon after. Other contractors are still thrashing out a deal.

"We've had about 11 meetings with them so far and have agreed to work with them over the next few weeks to finalise our claims. We have no other choice at the moment," said one contractor who did not wish to be identified. In a separate move, Nakheel placed a newspaper ad yesterday seeking claims consultants to bid for contracts to assess "claims related to Nakheel's various construction, consultancy, supply and other contracts".

The company said it was "increasing its resources to expedite settlement of contractor claims". Consultants have until May 30 to bid for the job, but with payments to trade creditors yet to be distributed, the developer may struggle to attract interest. "People are going to be nervous about getting paid if they go and work for Nakheel, but if they can build confidence around that I'm sure some companies will be up for doing the work," said a source at a UK-based cost consultancy, who asked not to be named.

Timothy Judge, the senior vice president of strategic development at the US construction consultancy Hill International, said his firm might consider bidding. "I think people will go into it with their eyes open," Mr Judge said. "I doubt Nakheel will have a problem attracting companies but I think the terms of the contract might be quite interesting because people will obviously be looking for security."

Meanwhile, a Dubai Government spokesman said yesterday that Dubai had repaid on schedule a $980 million Islamic bond issued by Nakheel. [e-mail]