New claims may add to Nakheel’s legal woes
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