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Nakheel: Dubai has given funds to repay $980 million bond

2010-05-12

DUBAI: Dubai has given developer Nakheel, part of a $24.8 billion debt restructuring at its parent Dubai World, enough funds to repay a $980 million Islamic bond due on May 13, Nakheel said in a statement on Tuesday. Nakheel, the builder of man-made islands shaped like palms, is widely expected to repay the bond on time despite the absence of a formal debt deal on Dubai World.  "Nakheel PJSC today announces that the Dubai Financial Support Fund has made available sufficient funds to allow for the repayment in full of the sukuk issued by Nakheel Development 3 Limited, which matures on 13 May 2010," Nakheel said in a statement to the Nasdaq Dubai bourse.  The Dubai Financial Support Fund was set up to distribute funds, raised via $20 billion sovereign bond programme, to government-related entities. Nakheel"s dirham-denominated bond was trading at 99.75 cents to the dollar on Tuesday, after the statement, according to data from Deutsche Bank Autobahn showed.  The bonds were trading at 98 cents on Monday. State-owned holding company Dubai World is in talks with banks to restructure debt repayments, with the rate of interest offered to the company"s bank lenders a key sticking point of the discussions.  Under the terms of Dubai World"s restructuring proposal unveiled on March 25, payment of the Islamic bond, or sukuk, was conditional on Dubai World reaching a formal agreement with all of its creditors. But a government spokeswoman later said that the bond would be repaid without an agreement if there was sufficient support for the plan.  Dubai"s debt plan offers Nakheel sukuk holders full payment on 2010 and 2011 bonds on maturity while trade creditors will be repaid through a mix of 40 percent cash and 60 percent in a sukuk, with a 10 percent annual return. Dubai World sent global markets spinning late last year when it said it would be unable to meet $26 billion in debt obligations. A last minute bailout from oil-rich neighbor Abu Dhabi helped the company and its subsidiaries stave off default.