Last week’s announcement that property developer Nakheel would payoff its remaining bank debt should have caught no one by surprise. The company in January first announced that a Dh2.3 billion repayment would be made 18 months ahead of schedule. The company said then the repayment was due to its own financial success following its restructuring and Dubai’s rebounding property market. The company made the same assertion on Wednesday when it announced it would repay Dh5.54 billion and clear the debts it owed lenders by late August of this year, four years ahead of schedule.
As a company that played a central roll in Dubai’s troubles just five years ago, it was critical for Nakheel to put any questions of its financial history behind it and show it was financially ready and able to take part in the emirate’s surging revival. That it was able to do so ahead of schedule is commendable. Hopefully, the experience of the past five years has made Nakheel a wiser company. The company made it clear that it repaid its debt early to show lenders it is capable of handling — in short — more debt. This has to raise eyebrows. Financing is a necessary part of project development, but borrowing cheap money during a construction boom is what contributed to Dubai’s previous economic troubles. Government action on both the federal and emirate level has made it clear that both are actively monitoring the situation to ensure no repeats of 2009, but the responsibility should not rest solely with the government. Companies, too, must be responsible to ensure the country’s economic health by borrowing responsibly.