The developer, which overstretched itself building islands in the shape of palms and other ambitious projects, will look to move past its financial worries and continue delivering projects and building new ones, its chairman promised at a press conference in Nakheel’s headquarters on the Palm Jumeirah.
“Dubai needs Nakheel because Nakheel is a key player ... if we manage to bring up all these properties and new ideas, it will be an added value to the economy of Dubai,” said Lootah, defending the emirate’s need to continue with the firm despite having no sales and piling an enormous debt.
Dubai has already given as much as $8.71 billion to the developer. The company, which was previously the property arm of Dubai World, will now be controlled by the Dubai government along with another debt ridden property firm Limitless, that is restructuring a $1.2 billion loan of its own.
“It’s been a tough 18 months,” said Lootah.
“The completion of the final restructuring ends a chapter for Nakheel and we look forward to delivering our commitments toward our trade creditors and investors.”
Lootah said the firm will issue the first tranche of a AED4.8 billion ($1.31bn) Islamic bond to trade creditors on Thursday worth AED3.8 billion ($1.03bn) at a profit rate of 10 percent.
Nakheel is restructuring a total of $16.06 billion in debt, including $8.71 billion of government debt which is to be converted into equity. The remaining amount is owed to trade creditors and banks.
Bank creditors will be offered an interest rate of 4 percent over the London Interbank Offered Rate (Libor) and repayment after five years, Lootah said. The company is restructuring $2.2 billion of bank debt.
The Islamic bond will not be backed by the government but by Nakheel’s assets, the chairman said, adding no assets had yet been sold as part of the restructuring.
Dubai’s property boom ended in 2008, with home prices plunging by about 60 percent forcing many developers to abandon projects.
Some of Nakheel’s ambitious projects like Palm Jebel Ali, another palm-shaped island stretching into the sea, is yet to be complete.
“Palm Jebel Ali won’t be completed any time soon. It’s a long-term project,” said Lootah.
However, Lootah said the firm would be announcing a new project to build more villas on the Palm Jumeirah shortly. He said the company had managed to settle about 60 percent of the liabilities of property investors.
“The company had about 10 billion dirhams in liabilities on long-term projects and we have resolved about 6 billion dirhams,” said Lootah.
Meanwhile, some contractors are still in talks with Nakheel over claims for the work they conducted and negotiations are underway to reach an agreement. The second tranche of the Islamic bond will be used to settle these claims.
