Nakheel says negotiates $272 mln contractor claims

Nakheel says negotiates $272 mln contractor claims

Chairman says second tranche of sukuk in H1; Says company on track to deliver 7,000 units in 2012; Says other Palm projects are "long-term"

January 5, 2012 3:58 by Reuters

Troubled Dubai developer Nakheel has negotiated contractor claims worth 1 billion dirhams ($272.24 million) so far and hopes to issue the second tranche of its Islamic bond within the next six months, its chairman said on Thursday.

“So far we have been successful in the negotiations,” Ali Rashid Lootah told reporters at the Nakheel headquarters in the man-made island Palm Jumeirah.

“We dealt with the claims of one billion dirhams,” Lootah said.

The indebted developer, which issued the first tranche of a $1.31 billion sukuk, or Islamic bond, to trade creditors in August as part of its restructuring, said the second tranche of one billion dirhams would be to settle claims of the contractors.

The contractors would be repaid up to 40 percent in cash and 60 percent via the bond, Lootah said.

“We hope to issue the sukuk in the first half of the year,” he added.

He declined to comment on how many contractor claims were pending and the value of these claims.

Nakheel was hit by the property slump in the Gulf Arab emirate after it overstretched itself building islands in the shape of palms and other ambitious projects.

Nakheel completed the restructuring of a total of $16.06 billion in debt, including $8.71 billion of government debt which is to be converted into equity.

The company, which was previously the property arm of Dubai World [DBWLD.UL}, is now controlled by the Dubai government along with another debt ridden property firm Limitless, that is restructuring a $1.2 billion loan of its own.

Lootah said after the restructuring, the company’s priority is to repay the contractors and to regain the confidence of investors.

“People are trusting Nakheel again… we are getting contractors who want to bid for some of our new projects,” he said.

He said the company is on track to deliver 7,000 units by end of the year and is also tendering new contracts in its retail segments.

However, Nakheel’s two other planned man-made islands, the Palm Jebel Ali and Palm Deira, are not to be developed soon, said Lootah.

“They are long-term projects,” he said. ($1 = 3.6733 UAE dirhams) (Reporting by Praveen Menon; Editing by Firouz Sedarat)