Nakheel ends restructuring, to issue $1bn sukuk
Dubai, August 24, 2011
Dubai's Nakheel will issue the first tranche of a Dh4.8 billion ($1.31 billion) Islamic bond to trade creditors on Thursday, its chairman said, as the property firm completes a complex debt restructuring underway since 2009.
Ali Rashid Lootah said the developer, which held separate debt talks with banks and trade creditors, will issue a Dh3.8 billion dirhams ($1.03 billion) first tranche of the sukuk at a profit rate of 10 per cent.
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.
'It's been a tough 18 months, we have managed to complete a complex restructuring,' Lootah said at a press conference.
'The completion of the final restructuring ends a chapter for Nakheel and we look forward to delivering our commitments towards our trade creditors and investors.'
The company offered trade creditors repayment of 40 per cent cash and the remaining 60 percent in the form of an Islamic bond, or sukuk as part of its restructuring program.
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.
The second tranche of the bond, the timeframe of which was not disclosed, will be used to meet trade creditor claims, he said.
Bank creditors will be offered an interest rate of 4 per cent 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 sukuk is already being offered at a 20 per cent discount in the secondary market by some trade creditors, signalling their preference to cash out rather than wait for maturity. It will trade on the Nasdaq Dubai bourse, Lootah said.
Nakheel, which overstretched itself building islands in the shape of palms and other ambitious projects, was part of state-owned Dubai World which recently completed a $25 billion restructuring with banks.
The developer's ownership shifted to the government last month as a concluding step of the parent firm's complex restructuring process.
Nakheel's co-ordinating committee is made up of National Bank of Abu Dhabi , Dubai Islamic Bank and Barclays Capital.-Reuters