x Abu Dhabi, UAEFriday 21 July 2017

“By 2018, we will be a debt-free company,” says Nakheel's chairman Ali Rashid Lootah.

Nakheel is to repay big chunks of its multibillion-dirham debts ahead of schedule and has no further need of financial aid from the Government.

The Dubai property developer’s move, announced yesterday, is further evidence of the continued recovery in the emirate’s economic fortunes, and of the company’s improved financial position.

In 2009, at the height of the global financial crisis, Nakheel’s debt burdens were a major factor in the turmoil that threatened to derail the emirate’s economy.

Yesterday, the Nakheel chairman Ali Rashid Lootah said the company would repay more than a third of its total bank debt of Dh6.8 billion, due for repayment in September 2015, in the current quarter. A total of Dh4bn would be repaid this year.

“The early repayment of Dh2.35bn – a major milestone in the company’s history – reflects the strength of the local real estate market, significantly improved economic conditions in the UAE, and the growing trust and confidence among investors in Dubai and Nakheel,” Mr Lootah said.

“By 2018, we will be a debt-free company,” he added.

“In 2011, Nakheel pledged to construct and deliver some 9,000 units over a five-year period across a number of projects that had been stalled during the global financial crisis.

“We rose to this challenge and, thanks to the support of the Government of Dubai, Nakheel customers and others stakeholders, have been able to achieve this remarkable milestone.”

The turnaround in Nakheel’s fortunes means that it has used up only a small proportion of the cash that the Government made available in the form of equity at the time of the restructuring in 2011. Of Dh16.6bn pledged by the Government’s financial support fund, only Dh1.4bn had been used, Mr Lootah said, and Nakheel needed no further support.

Nakheel’s move is part of a trend of prompt repayment of liabilities by Dubai state-related enterprises.

Dubai World, the company that controlled Nakheel until it was taken over directly by the Government in 2011, has been raising cash through asset sales to meet a $5.5bn debt commitment next year, while Dubai Holding has also been selling assets and raising cash.

The IMF estimates Dubai has to meet $85bn of maturing debt by 2017.

Mr Lootah said that revenues and profits had doubled since 2011, and there had been a threefold increase in cash flow in that period.

“This strong financial performance is the result of Nakheel recommencing all 10 of its “near term” projects, giving the required impetus to the local real estate market by providing opportunities for local contractors to restart construction activity in Dubai,” he added.

“The result of these efforts is borne out by the fact that by the end of 2013, Nakheel had handed over 7,000 units to consumers and paid amounts aggregating to Dh12.3bn to various contractors, creditors and suppliers since the restructuring began in November 2009. Our financial performance has significantly exceeded the revised business plan, leading to improvements of approximately Dh22bn over the plan period,” Mr Lootah said.

The company, renowned for the Palm Jumeirah development, has also launched new projects. There are more than 3,500 units with an estimated current value of Dh10bn in the pipeline.

Mr Lootah confirmed that Nakheel would consider an initial public offering of shares once its financial restructuring is complete, but added: “That [an IPO] is a decision for the shareholder. We have to deal with the debt.”

He said he was still in talks with bankers about refinancing the terms of some of its bank loans, which extend until 2018. “I’ll be waiting to see how they react to this [the early repayment announcement]”.

The future strategy of the company would be to focus on retail and leisure developments, as well as top-end residential projects. Those earmarked for the near term include The Pointe development on Palm Jumeirah, and further work at the Al Furjan site.

“We will go where we have existing infrastructure, because building that is an expensive affair,” he said.

He said that resumption of the Jebel Ali project would depend on how quickly and efficiently infrastructure could be provided. “It’s not on our immediate radar,” Mr Lootah said.

fkane@thenational.ae