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The Death of Development, Part I

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



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.



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2 Comments

  1. Anupama V. Chand on January 12, 2010 7:23 am

    Rather surprising when you consider the overreaching optimism on the one hand and the greed on the other to be the best…..did everyone lose their grip of reality? Can you ever spend more than you have? Simple market economics, and one which could have gone a long way in keeping corporations like Nakheel in check. And prevented Dubai from becoming a laughing stock in the international scene, where till 2008, it was always considered an exemplary business model. Anyway, hopefully, these are lessons learnt, and those involved would have learnt to check their wallets before making overly ambitious investment decisions! If they get the chance to do so, of course!!

     
  2. Mounir on January 21, 2010 7:50 am

    Err..
    “Nakheel’s parent company recently defaulted on its billions in debt (deftly billed by the government as a ’standstill’)”

    On what planet did Nakheel’s parent company actually default on its billions in debt? Or are you just going to be a Dubai Basher regardless of any facts?

    Get your facts straight, no one defaulted on anything.

    There goes the credibility of the rest of this ‘report’.

     

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