New claims may add to Nakheel’s le­gal woes

The Pak Banker - - I Nternational -

DUBAI: Prop­erty de­vel­oper Nakheel's (NAKHD.UL) re­struc­tur­ing plan is be­ing com­pli­cated by new claims from trade cred­i­tors that could lead to more le­gal headaches, two sources fa­mil­iar with the mat­ter said.

Un­like par­ent firm Dubai World (DBWLD.UL), which se­cured unan­i­mous sup­port from len­ders within a year for its $25 bil­lion debt re­struc­tur­ing plan, Nakheel is strug­gling to ne­go­ti­ate terms with a mass of contractors that hold the keys to its many de­layed projects.

"Nakheel is a much more com­pli­cated re­struc­tur­ing than even Dubai World," said one source with di­rect knowl­edge of Nakheel's re­struc­tur­ing plans. "Dubai puts a lot of im­por­tance on the trade cred­i­tors for the sake of the econ­omy so there has to be a lot more room for ne­go­ti­a­tion."

Nakheel was at the cen­ter of Dubai's real es­tate boom with projects such as is­lands in the shape of palms and a map of the world.

Un­der the terms of its $10.9 bil­lion re­struc­tur­ing pro­posal, trade cred­i­tors will re­ceive 40 per­cent in cash and 60 per­cent re­pay­ment through an Is­lamic bond with a 10 per­cent re­turn.

Nakheel, which be­gan mak­ing cash pay­ments in June, had pre­dicted an over­all agree­ment within weeks. But the on­go­ing bat­tle with trade cred­i­tors over claims has de­layed the sukuk's is­suance. It is now slated for the first quar­ter next year. While more than 80 per­cent of trade cred­i­tors have agreed to the deal-still shy of the 95 per­cent needed to fi­nal­ize the re­struc­tur­ing-some of those cred­i­tors are pre­sent­ing ad­di­tional claims for dam­ages, such as lost busi­ness or dam­aged equip­ment.

Contractors of­ten come back with ad­di­tional fees and ex­penses re­lated to un­ex­pected oc­cur­rences dur­ing a project - add-on costs that de­vel­op­ers are ac­cus­tomed to deal­ing with. But ad­di­tional claims can be­come a cum­ber­some prob­lem for a com­pany in dis­tress, adding to its le­gal costs and po­ten­tially cre­at­ing more de­lays. -Reuters

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