DUBAI: Dubai World’s indebted property arm Nakheel is very close to hitting a key threshold among large trade creditors that would allow it to begin paying overdue bills, a company spokeswoman said on Monday.
For Nakheel, once known for its glitzy palm-shaped islands, paying arrears to large contractors would be the first step towards helping the company to restart the myriad of stalled projects scattered throughout the emirate.
Nakheel said in May that about 50 percent of its creditors had already agreed to the deal and once 65 percent accept the terms, the creditors will begin receiving cash payments.
Trade creditors owed more than AED500,000 ($136,200) have been offered full repayment, with 40 percent in cash and the rest with an Islamic bond, or sukuk, which has a 10 percent annual return.
"Many of the creditors are coming to the conclusion that this is the only deal on the table so it’s better to get something rather than nothing," said Ashley Painter, partner at Clyde & Co, who represents some creditors.
Nakheel’s spokeswoman said talks are continuing with the larger creditors, but more have agreed to the proposal since the announcement was made last month.
"We’re very happy with all the progress that’s been made and hopefully this will be wrapped up quite soon," she said.
Nakheel has already begun to repay small trade creditors owed AED500,000 or less, who it has put into a different category than larger firms.
She said the payments were aimed at helping to revive construction projects that were stalled as Nakheel struggled to pay its creditors but did not specify which projects would resume first.
"Our intention is to carry on all the near-term projects," she said.
Nakheel’s proposal is part of Dubai’s $9.5 billion rescue plan for Nakheel’s parent, state-owned Dubai World, unveiled in March. The conglomerate is in talks with lenders to restructure $26 billion in debt.