Nakheel, the property developer behind Dubai's palm-shaped islands, is inching closer to a settlement with contractors and other trade creditors, although the US$10.5 billion (Dh38.56bn) restructuring of its liabilities is taking longer than first planned.
The company has received approval on the restructuring from trade creditors representing about 91 per cent of the value of claims, it said yesterday. That is still short of the 95 per cent needed to move forward with the plan.
"We continue to work to achieve the required 95 per cent restructuring threshold," Nakheel said.
Nakheel asked for new terms on payments after a debt-fuelled building spree came to a halt in the wake of the financial crisis, leaving the company with billions of dollars in bills and inadequate resources to pay them.
As Nakheel sought a detente with contractors, its parent company, the government-owned Dubai World, also underwent a restructuring. Dubai World reached a final agreement in September with its bank creditors to restructure $24.9bn of debt into new loans maturing in five and eight years.
A March proposal envisaged full repayment to all of Nakheel's contractors. Those owed more than Dh500,000 were to be given 40 per cent in cash and 60 per cent in the form of an Islamic bond. Those owed less than Dh500,000 were to be repaid entirely in cash.
About Dh3.4bn in cash had been paid out by October to the company's smaller trade creditors. But the Islamic bond, or sukuk, has repeatedly been delayed as Nakheel continues complex negotiations with its bigger contractors and tries to reach the 95 per cent approval target.
Ali Rashid Lootah, the Nakheel chairman, said in August a sukuk would be likely to come before the end of the year. In October, Chris O'Donnell, the chief executive, said the company would issue an Islamic bond to contractors by next month. The five-year sukuk is to be publicly traded and pay 10 per cent per annum in profits.
Nakheel said it had netted 85 per cent approval on its restructuring in September and 90 per cent the following month. It has not made much progress since.
Riad Kamal, the chief executive of Arabtec Holding, said his company was watching closely as Nakheel's plans unfolded. Arabtec, based in Dubai, is one of the Middle East's largest construction firms and a major trade creditor of Nakheel.
"We're not frustrated, and I'm sure as soon as they've got everything in place we're confident that the bonds will be made available," Mr Kamal said. "If it takes a week or a month longer, well, we've waited a couple years, so we can wait a couple more weeks."