DUBAI: Dubai developer Nakheel plans to repay nearly a third of its total bank debt in the first quarter of 2014, well ahead of maturity in 2015, as it benefits from a rebound in the emirate’s property sector.
Nakheel, the builder of a palm tree-shaped island off Dubai’s coast, was the most high profile casualty of the Gulf state’s property market collapse in 2009 and was taken over by the government as part of a $16bn rescue plan in 2011.
The property market rebounded in 2013, with prices rising around 22 percent from 2012. In the crash, they had plummeted more than 50 percent from their 2008 peak.
As a result of the rebound, Nakheel will not require further government support and is targeting annual profit growth of 15 percent, its chairman, Ali Rashid Lootah, said. “We are confident that we will not touch the government funding and we will be ok without it,” Lootah said.
“Where there’s a will, there’s a way. We will keep looking at ways to cut costs. When there’s a need to raise cash, we will do so,” he added.
Of the Dh6.8bn ($1.85bn) of bank debt due in 2015, Nakheel will repay around Dh2.35bn in February and another Dh1.65bn in August, the company said. “These funds came from increased sales and also by mitigating claims of creditors,” he added.
The developer handed over 7,000 units to customers last year.
The company’s total cash outflow of Dh56.9bn that was assessed after the restructuring has been cut to Dh41.3bn, and the net deficit has dropped by Dh22bn to Dh8bn, it said.
Nakheel will also repay a $1.2bn Islamic bond, which it issued to trade creditors as part of its restructuring plan due in 2016, on time. “We will have no trouble repaying on time,” Lootah said.
Of trade creditors’ Dh8bn of claims against the company, nearly all have now been settled amicably, with the expected payout to be worth around 15 percent of the total, according to a presentation by the company.
Trade creditors often settled claims at a steep discount as they needed the funds quickly after a long delay in repayment by Nakheel as it secured its restructuring.
Dubai’s building boom came to a grinding halt in the wake of the 2009 financial crisis and state-owned Nakheel shelved several projects including two other palm-shaped island projects and an island shaped as the world.
Nakheel will restart one of the palm islands, though on a smaller scale. However, development of Palm Jebel Ali and the The World islands are still incomplete.
Lootah said there would be no further infrastructure development at the World islands. “We sold it as it is and we are encouraging customers to start development.” The state firm aims to shift away from residential developments to more lucrative malls and hotel projects. Reuters
