DUBAI: Dubai’s Nakheel will complete paying out the cash portion of overdue debt to contractors by the end of July, a source told Reuters, in a sign the deeply indebted developer is clearing a logjam of obligations.
The July end-date puts a timeline for the first time on the long-awaited payout and should offer some relief to the trade creditors left awaiting the $1.09 billion in cash. Palm-builder Nakheel has become the poster child for Dubai’s debt dilemma.
It also opens the door to the second step in Nakheel’s debt restructuring plan, in which creditors will receive 60 percent of the obligations in the form of an Islamic bond or sukuk and receive a 10 percent annual return.
The source, who has direct knowledge of the debt deal, declined to be named because he is not authorized to speak to the media.
Dubai World, Nakheel’s owner, agreed with its core creditor banks on a proposal to restructure $23.5 billion in debt in May.
A Nakheel spokeswoman declined to confirm the payment timeframe.
Nakheel said in late June it had started making cash payments to trade creditors, who have laid off thousands of workers in Dubai as developers fell behind on paying bills.
Arabtec, the largest builder in the United Arab Emirates by market value, said in late June it expected payments in cash to be made soon while payment in the form of a bond will take a few months.
Arabtec received a token payment from Nakheel of AED500,000 ($136,200) in June.
Some analysts have put the figure Nakheel owes Arabtec at around AED2 billion.