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Nakheel outlines debt plan to bank lenders

Dubai, July 14, 2010

Debt-laden Dubai property developer Nakheel outlined detailed terms of its plans to repay bank lenders on Wednesday, asking them to respond to the proposal by August 31.

The developer, which has overstretched itself building islands in the shape of palms and other ambitious real estate developments, is in continuing talks with creditors on restructuring $10.5 billion in bank debt.

"It's an important step but no specific resolutions were sought today. It was a presentation of detailed terms," the company's spokesman told Reuters.

Nakheel made a presentation to some 20 banks, who represent its financial creditors, at a meeting in the Atlantis hotel, a lavish pink palace perched at the seaward tip of its landmark Palm Jumeirah island development.

"They gave us some guidelines on what they can do, which we will now look in to. It looks overall quite optimistic," said one banker at the meeting, who declined to be identified.

Lenders were asked to respond to Nakheel by Aug. 31.

Nakheel is currently in negotiations with banks over one remaining syndicated loan worth $1.8 billion and a number of bilateral ones.

"Each facility has its own deal," said one source familiar with the matter. "They are individually negotiating terms of each facility with the coordinating committee. You can't put one number on it but they will likely have similar terms."

It's coordinating committee is made up of Barclays Capital, National Bank of Abu Dhabi and Dubai Islamic Bank.

Bank lenders have been offered a maturity extension of between five and seven years.

Nakheel has already begun making cash payments to its trade creditors under a plan unveiled by Dubai for Nakheel's parent company Dubai World in May.

Dubai World is working at the same time to restructure $23.5 billion of its own debt. Dubai World's plan has won the approval of its core lenders and it will put it before the entire group of banks on July 22.

Nakheel -- which has repaid two Islamic bonds worth $5 billion since Dubai shocked markets with a plan to delay debt repayments last November -- is in separate talks with its creditors, although many of the lenders are owed money by both entities.

It has offered its trade creditors full repayment, with 40 per cent in cash and the rest via an Islamic bond, or sukuk, which has a 10 per cent annual return.

In contrast, Dubai World's lenders will have to wait up to eight years to get their money back under the terms of its deal, with a maximum interest rate of 3.5 per cent.

The disparity between the two offers has been a sticking point for some lenders, who feel that Nakheel has been offered a far better deal.

Analysts also see a disparity between the trade and bank creditors of Nakheel.

"The offer to trade creditors is still better as they get a mix of cash and a bond with a higher interest rate than what is being offered to banks," said Andre Andrijanovs, corporate analyst at London-based distressed debt firm Exotix Limited.

"They (banks) do not have much of a choice. The negotiation margin is very low. Overall, the banks are likely accept the offer."

Nakheel will complete paying out the cash portion of overdue debt to contractors by the end of July, a source told Reuters earlier this month.

The developer was at the heart of Dubai's bid to transform itself into a trade and tourism hub, leading the charge in a real estate boom that abruptly ended in 2008. – Reuters




Tags: Dubai World | nakheel | debt | Lenders |

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