Nakheel takes step towards debt restructuring

Dubai: Nakheel plans to offer lenders interest of 4 percentage points more than benchmark rates as it seeks to restructure $10.5 billion of debt, according to two bankers with knowledge of the plan.

Nakheel, the builder of the Palm island developments off Dubai's coast, plans to offer the new interest rate on its loans in dollars and dirhams at a meeting today, said the bankers, who declined to be identified because the matter is private.

In return, lenders would agree to extend the lifetime of the loans by five years, the people said.

The proposed terms aren't final, according to one of the people. The loans make up part of the debt that Nakheel is seeking to reorganise, which also includes outstanding payments to suppliers and contractors.

The spreads will be over the Emirates interbank offered rate or the London interbank offered rate, the bankers said.

Spokesmen for Dubai World and the Department of Finance, which has pledged $8 billion to Nakheel, declined to comment.

Nakheel said on March 25 that its secured bank creditors will receive 100 per cent of their principal and accrued interest under an agreement to extend the maturities of its loans.

The developer has one dollar loan outstanding, a $1.85 billion facility that was signed in August 2007 and is currently due to expire in 2012.

The borrower said on June 30 it had begun settling bills from its biggest trade creditors, involving a payout of Dh4 billion.

Nakheel and parent Dubai World are seeking to renegotiate terms on their debt. Property prices have dropped as banks have cut mortgage lending.

• $8b pledge by Department of Finance
• $1.85b outstanding dollar loan of developer
• $10.5b value of Nakheel'stotal debt