Nakheel to settle trade creditors

Dubai: Dubai property developer Nakheel said it will soon start paying its trade creditors Dh500,000 cash.

"Each of Nakheel's individual trade creditors will shortly receive a cash payment of up to Dh500,000. Half of the contractors by number have balances of up to Dh500,000 and therefore will have their balances settled in full," a Nakheel statement said yesterday.

Nicholas Maclean, Managing Director at CB Richard Ellis Middle East, a property consultancy company, described the announcement as a step forward in bringing back confidence into the market.

This isn't just good news to Nakheel, but for the Dubai market a well, he told Gulf News. "I think the international commercial investors were already looking at Dubai and this will give them added confidence," he said.

"I think there will be a specific but direct impact which goes back to sentiment. If we can attract cash flow from overseas then this will also affect the market here. If the sentiment is right then other schemes will feel comfortable."

Plans

Through the Dubai Financial Support Fund (DFSF), the Government of Dubai will give $9.5 billion in funding to support the restructuring plans for Dubai World and its property developer Nakheel.

According to a statement released by the Government of Dubai yesterday, the funding will come from a $5.7 billion (Dh34 billion) remaining from the loan previously made available from the Government of Abu Dhabi, in addition to other internal Dubai Government resources.

Nakheel has announced its "comprehensive recapitalisation plan" under which the Government of Dubai will provide approximately $8 billion directly to Nakheel to fund operations and settle liabilities.

The plan will also enable Nakheel to offer creditors 100 per cent of agreed amounts owed to fulfil its obligations to customers through the completion of near-term projects, the statement said.

Funds

Once the proposed plan is agreed upon, an initial $1.5 billion of the new funds from the DFSF will be made available to Nakh-eel in order to fund contractors and to continue building near-term development projects.

Reuters reported that according to a senior official, Dubai's government will take full ownership of Nakheel once the debt restructuring plan is completed.

According to details of the plan published yesterday by Nakheel, the developer will be transparent with its customers over completion and handover dates of the projects.

Maclean also pointed out that this time would be a good opportunity to address the lack of mortgage in the market place and build on the confidence.

When asked about whether the new cash flow will affect the value of Nakheel's assets, Maclean said that prices will recover to a certain extent here when the global economy recovers.

"Hopefully this will put Dubai in the right direction and it's good to see the coordination between the three parties," he said.