Dubai’s Nakheel to tap state funds to repay bonds

31/12/2010 00:00 AST

The Dubai property developer behind the emirate’s man-made islands said Thursday it will tap government support funds to repay more than $800 million in debt due next month as it pushes ahead with restructuring talks.

Nakheel announced plans to use funds from the Dubai Financial Support Fund to repay the sukuk, a type of Islamic bond, in a regulatory filing to the Nasdaq Dubai stock exchange. It did not provide details of the aid other than to say the government “made available sufficient funds to allow for the repayment in full.” The sukuk was issued in 2008 with a principle of $750 million. It comes due Jan. 16.

Nakheel says it will pay out a total of $871.6 million to settle the debt, including profit distributions and other costs.

The developer is in talks to persuade a handful of holdout creditors to sign on to its plan to restructure at least $10.5 billion in debt.

On Wednesday, it said it has support from more than 90 percent of its nonbank creditors such as contractors and suppliers for the plan — short of the 95 percent it is seeking. It is also working to get financial creditors to agree to the proposal, which it had hoped to have sealed up by year’s end.

Nakheel is now aiming to have the debt restructuring completed in the first quarter of 2011, a company spokesman said Thursday, speaking on customary condition of anonymity. It plans to issue a new sukuk once that deal is in place to help cover restructuring costs.

Nakheel was at the center of Dubai’s financial crisis that shook global markets last year. It amassed billions of dollars in debt by building man-made islands off Dubai’s Arabian Gulf coast in the shape of palm trees and a map of the world.

It is a division of indebted state conglomerate Dubai World, which secured full creditor support for its own $24.9 billion debt restructuring plan in October.

Arab News