Nakheel to give full repayment to its contractors soon

Nakheel, the developer of palm-shaped man-made islands, will give full repayments to its contractors soon, the top official of the UAE Contractors’ Association said.

A final deal over Dubai developer’s debt repayment offer should be completed within two weeks, Association Chairman Dr Ahmed Saif Balhasa said. “We understood from Nakheel that it will give full repayments soon,” Balhasa said in the Emirati newspaper Al Bayan, urging other contracting companies to sign the deal quickly.

The developer has 50 per cent approval for the deal, Balhasa said, leaving it 15 per cent shy of the necessary 65 per cent. The last 15 per cent should not be difficult to get he said, because of assurances given to creditors by Nakheel.

Last week Nakheel met with senior members from the Association, including Belhasa, as part of its efforts to ensure settlement of claims to its trade creditors as part of its recapitalisation plan. Delegates were briefed on Nakheel’s progress to date to settle agreed claims to its trade creditors, which now represents more than 50 per cent of total agreed claims.

On Wednesday, Arabtec, the UAE’s largest builder by market value, signed on to Nakheel’s debt repayment offer. “We have concluded the deal and we encourage everyone to sign,” Arabtec’s Chief Executive Riad Kamal told Reuters. “Time is not on our side...This is a good agreement for everybody.”

Trade creditors have been offered full repayment, with 40 per cent in cash and the rest with an Islamic bond, or sukuk, which has a 10 per cent annual return. Nakheel repaid a $980 million Islamic bond on schedule last week.

Nakheel is restructuring $10.5 billion of debt and has asked trade creditors to wait five years to receive full payment after falling behind on its bills. The Dubai government in March pledged to pump $8 billion in cash into Nakheel to help it pay contractors and suppliers and complete developments.

Boost to lending

“It will improve banks’ books and will help boost lending sooner than otherwise,” Majed Azzam, an analyst at Al-Futtaim HC Securities, said of the debt accord. “It will have a knock-on effect on property. Banks may now be more comfortable to lend to contractors and developers.” The company in March said it will offer finished properties or securities to customers who purchased units in developments that won’t be completed.

“For people to regain some of the confidence they’ve lost in Dubai, Nakheel needs to show some progress” in restructuring its borrowings and paying its debt to contractors, said Omar Taha, an equities analyst at Beltone Financial in Cairo.