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The Death of Development, Part I
Dubai master-developer Nakheel, which aimed for the stars with iconic projects, prepares for a dramatic restructuring, reports Trends. Part I.
January 11, 2010 1:08 by Edmund Sheen
Ask anyone around the world if they’ve heard of Dubai and nine times out of ten they’ll tell you that it’s home to the Palm islands.
That’s why all eyes are focused on Nakheel these days. The company behind the Palm Jumeirah and many other of Dubai’s high-profile developments is on a precipice.
No company has done more than Nakheel to help Dubai emerge over the past decade as one of the world’s leading tourism, retail and airline hubs. The company’s over-the-top developments have come to symbolize an emirate brimming with confidence.
But then there’s the Nakheel of today, a symbol of the grim economic issues that Dubai is facing after years of unchecked spending and exuberant construction binging.
Nakheel’s parent company recently defaulted on its billions in debt (deftly billed by the government as a ‘standstill’) as Dubai’s ruler has just hired a top restructuring consultant from Deloitte LLP.
Many investors world the around were stunned by the Government of Dubai’s announcement late last month that it would call for a standstill on the billions in outstanding Dubai World and Nakheel debt.
That Dubai is pushing repayment of some $4 billion down the road until May of next year confirms longstanding suspicions that the government and its entities like Nakheel were in even worse financial shape than originally thought.
The announcement came after months of statements by senior company officials that the debt would be repaid. Instead, investors are preparing themselves for what they were hoping wouldn’t be necessary: Protracted lawsuits demanding repayments.
No doubt the stunning announcement of a debt standstill bought Nakheel time. One of the first orders of business in November was the appointment of a Deloitte LLP executive as Dubai World’s new Chief Restructuring Officer.