Another Nakheel knock

Another Nakheel knock

Poor old Nakheel; it’s a case of two steps forward, one step back, after a creditor filed against it in the always entertaining Dubai World tribunal.

January 6, 2011 2:39 by Eva Fernandes

It seems to be a dance of foxtrot for troubled Dubai property developer Nakheel, which appears to be taking two steps forwards and one back, if recent developments are anything to go by.

After patting itself heartily on the back for repaying trade creditors a whopping Dh3.9 billion to date, news has just emerged of the non-cancellation of a deal worth a little under a billion dirhams in a claim against the developer.

The claim comes from Souq Residences, a 50-50 joint venture between Kuwaiti IFA Hotels and Resorts and Dubai World subsidiary Istithmar, which is claiming Dh920 million from Nakheel in the ongoing Dubai World tribunal. IFA, which was one the earliest investors in the Palm, claims that Nakheel’s 2008 agreement to buy Dh1 billion retail space on the Golden Mile (a stretch of residential buildings with commercial ground floor units on the trunk of The Palm) was never cancelled.

Interestingly enough, last November it was Nakheel who first took Souq Residences to court at the tribunal, to recover the Dh100 million it said it had invested in the Golden Mile before the transaction was cancelled.

In addition to the non-cancellation of the deal, Souq Residences are also alleging that Nakheel has “wrongly prevented” it from leasing or selling retail space and handing over apartments by not issuing them building completion certificates and no-objection certificates. As per usual, Kipp is left scratching its head at this tug of war.

But it isn’t all bad news for Nakheel these past weeks. The company just announced that contractors and other trade creditors who are behind 91 percent of large claims against it have agreed to a restructuring proposal by which they will receive 40 percent of what they are owed in cash with the rest being paid back in the form of an Islamic bond that matures in five years. However, before they can move forward with the plan Nakheel needs approval from 95 per cent of claimants to move forward.

What is more this week, Nakheel in an emailed statement said ‘We are delighted to announce that Nakheel has to date made payments of Dh3.9 billion to its trade creditors (…)Today’s announcement marks significant progress in our recapitalisation plan, following on from the initial payments to trade creditors of Dh500,000 or less, which commenced in March 2010.” The dance continues…