Dubai's largest state-owned developer has completed a sweeping financial shake-up and will issue a Dh3.8 billion Islamic bond to unpaid contractors tomorrow, putting down the final piece in a puzzle that took a year and a half to assemble.
Ali Lootah, the chairman of Nakheel, said today was a "great day in the history of Nakheel" after Dubai's property slump nearly put it out of business.
"The completion of this financial restructuring is closing an old chapter and looking forward for delivery and meeting our commitments towards our investors and our trade creditors and also to re-establish the name of Nakheel and put forward new projects which are needed for our company and the Dubai economy," Mr Lootah said.
Nakheel was behind some of Dubai's most ambitious boom-time projects, including its trio of palm-shaped islands and The World, an archipelago in the rough shape of a world map. It was part of Dubai World, the government group that was the backbone of the emirate's light-speed growth strategy during the boom.
Mr Lootah defended Nakheel's importance in Dubai's economy, saying it "will stay that way" even after sales dried up and it could not refinance debts during the financial crisis.
The Islamic bond, or sukuk, was a key part of a recapitalisation plan Nakheel announced last March that served as the cornerstone of its effort to get back on its feet. Contractors with unpaid bills from Nakheel were given up to Dh500,000 initially. Those owed more were to be paid 40 per cent in cash and 60 per cent in the form of sukuk shares yielding 10 per cent per year.
After numerous delays, Mr Lootah said a first Dh3.8bn piece of the sukuk will be issued tomorrow. Nakheel expects that additional claims from contractors could eventually increase the value of the sukuk to Dh4.8bn.
In all, Nakheel has paid out Dh6.7bn to contractors and suppliers, Mr Lootah said, calling them "priority number one".
Mr Lootah also held out an olive branch to average property investors, saying the company had already settled 60 per cent of its liabilities to them and was continuing to negotiate. The focus has been on giving investors credit notes for money paid into stalled projects and transferring them into properties that are going forward.
The company had about Dh10bn of liabilities on long-term projects, Mr Lootah said, and Nakheel had resolved about Dh6bn worth.
Investors who opt not to take credit notes or consolidate their investments will be paid in cash after five years, he said.
With the completion of the restructuring, Nakheel has been legally separated from Dubai World, Mr Lootah said. It is now owned fully and directly by the Dubai Government.
The total value of Nakheel's restructuring is about Dh60bn, according to Sanjay Manchanda, its chief financial officer and acting chief executive. That included about Dh32bn in government injections, Dh19bn of trade creditor debt and Dh8bn in bank debt, he said.