Reuters – Dubai developer Nakheel plans to repay up to 4bn dirhams ($1.1bn) of bank debt due in 2015 this year, its chairman said on Saturday, as the firm benefits from a rebound in the emirate’s property sector.
Nakheel, known as the builder of a palm tree-shaped island off the coast of Dubai, was taken over by the government as part of a 56.9bn dirhams ($16bn) rescue plan completed in 2011, following the bursting of a real estate bubble in the emirate in 2009.
However, the property market rebounded in 2013, with prices up around 22% versus 2012. In the crash, they had plummeted more than 50% from their 2008 peak.
As a result of the rebound, Nakheel will not require further government support and is targeting annual profit growth of 15%, Ali Rashid Lootah told a news conference.
Nakheel’s profit jumped in recent quarters on the back of the local real estate recovery – its nine-month net profit was 58% higher year-on-year, it said in October.
The recovery has allowed Nakheel to restart projects which had previously been shelved because of the crisis, including another palm-shaped island.
“We will have four new hotels to be announced this year. This is part of our strategy to build more cash generating assets,” Lootah said, adding that it plans to invest 4.7bn dirhams on new retail and hospitality projects this year.
The company’s total cash outflow of 56.9bn dirhams that was assessed after the restructuring has been cut to 41.3bn dirhams, and the net deficit has dropped by 22bn dirhams to 8 billion.
Of the 4bn dirhams it will repay early, around 2.35bn dirhams are earmarked for payment in the first quarter of this year, he said. The total debt facility due in 2015 is worth $2.2bn.
Lootah had said in June that discussions were ongoing with the around 30 local and international banks to refinance the loan, having said in February the firm was looking to extend the loan’s lifespan as it was very short.
“These funds came from increased sales and also by mitigating claims of creditors,” he added.
Nakheel will also have no problems repaying a $1.2bn in Islamic bonds, which it issued to trade creditors as part of its restructuring plan due in 2016, Lootah said.
Of trade creditors’ 8bn dirhams of claims against the company, nearly all have now been settled amicably, with the expected payout to be worth around 15% of the total, according to the presentation.
Trade creditors often settled claims at a steep discount as they needed the funds quickly after a long delay in repayment by Nakheel as it secured its restructuring, as well as to ensure the maintenance of a good relationship with one of the key real estate developers in Dubai.