Thursday, Apr 14, 2011
Leila Hatoum
Of ZAWYA DOW JONES
DUBAI (Zawya Dow Jones)--Nakheel, the real-estate unit of Dubai government-owned conglomerate Dubai World, may sell assets to meet future cash needs but has no intention of launching an initial public offering or Islamic bonds any time soon, the company's chairman said.
"If needed, we might sell some of our assets. It is in our plan," Ali Rashed Lootah told Zawya Dow Jones in an interview this week.
However, the company is "not under pressure now to make any sale," he said
Nakheel got into financial trouble in late 2009 after being hit hard by the fallout from the global financial crisis, which saw housing prices in Dubai slump and a real-estate bubble burst. The developer ramped up billions of dollars worth of debt during years of spending on some of the world's most extravagant real-estate projects such as Dubai's palm tree-shaped artificial islands.
Last year, Nakheel embarked on a $10.5 billion debt restructuring and in March 2010 secured about $8 billion of fresh funds from the Dubai Financial Support Fund to fund operations and settle liabilities. The DFSF also agreed to convert $1.2 billion debt into equity. The DFSF was set up in 2009 to distribute funds to struggling government-related entities via a $20 billion sovereign bond program.
Lootah, speaking at his Nakheel office at the tip of the trunk of Palm Jumeirah, said the property firm wasn't presently in need of raising additional funds. Nakheel "has enough cash at the moment" and the Dubai government's "support is more than enough," he said.
Lootah also ruled out an IPO or sukuk issue in the near future.
"There won't be any IPOs. We aren't thinking of it. There is no need for new sukuk," aside from the planned Islamic bond intended to pay back the company's trade creditors, he said.
Nakheel's trade creditors last year were offered repayment through a mix of 40% cash and 60% via Islamic bond, or sukuk, as part of the debt restructuring. The company said in March it had paid 4.6 billion U.A.E. dirhams ($1.25 billion) to trade creditors so far, with the sukuk still to be issued.
The property firm, also in March, announced that the restructuring process was expected to be concluded by mid-2011. The company said at the time it would soon start issuing restructuring agreements--including the sukuk term sheet--to eligible trade creditors who already signed restructuring undertakings.
"We had reached a deal with 91% of our trade creditors," Lootah said, adding that the Dubai government had "agreed later on to lower this threshold to 88% from 95% as there is no need to halt the sheer majority of our trade creditors to wait for...those who are refusing the deal."
"Those who refuse the deal, and based on the contractual procedures, they have the right to resort to arbitration and legal measures, but it will have no effect on the restructuring process," Lootah said.
As part of a wider restructuring at Nakheel, the real-estate firm has also reduced the number of its staff "across the board" by one-third to about 950 employees, he added.
The restructuring comes amid ongoing challenges for Dubai's property sector. Real-estate consultancy Jones Lang LaSalle said in a report earlier this week that oversupplies in Dubai's residential property market would continue to drive down prices throughout the year. The emirate's office market was faced with a similar situation, JLL said.
Lootah said he was positive on Dubai's real-estate sector, which he said was showing some signs of recovery.
"We see signs of improvement in prime property and we see demand increasing," he said.
-By Leila Hatoum, Dow Jones Newswires; +971-4-446-1686; leila.hatoum@dowjones.com
Copyright (c) 2011 Dow Jones & Company, Inc.
(END) Dow Jones Newswires
14-04-11 1043GMT
