Dubai: Nakheel well be retiring part of its debts with creditor banks more than a year before its due on the back of an upbeat Dubai realty market and significant growth in its cash position. The intention is to pay the first tranche, of Dh2.35 billion, by end February and another Dh1.65 billion later in the year.
As per the deal struck with creditors for total obligations of Dh12.5 billion (Dh7.5 billion with banks and Dh4.5 billion as sukuk), the first payment is only due by September 2015. “By pre-paying, Nakheel is sending an important message out into the market,” said Ali Rashid Lootah, chairman, at a press conference on Saturday. “We will still talk to the banks about refinancing and getting better terms — there’s nothing to lose by doing so. From tomorrow (January 6), we will wait for the reaction from banks on our pre-payment plans.”
As per current plans, in addition to the Dh4 billion repaid this year, next year will see Dh3 billion and Dh4.5 billion in 2016 (related to the sukuk) and 900 million in 2018.
“We continue to deliver on our revised business plan and to earn trust and confidence among investors,” said Lootah. “We expect to further reduce our debt burden in subsequent years to improve the financial health of our business.”
While it will be announcing its 2013 revenues by the end of the month, the developer managed to make substantial gains on the cost restructuring side. Cash collections improved — to Dh23.8 billion against the planned Dh18.2 billion — and inflow from non-development activities were Dh9.5 billion against the planned Dh2.2 billion.
But it was on the cost side that Nakheel pulled out the heavy gains. Against earlier estimates of Dh42 billion under “restructuring/financing” costs, Nakheel actually reported Dh31.2 billion. “Cost to complete” and “overheads” both came in lower than planned.
On its books, all of this translated into a cash surplus of Dh18.8 billion.
As part of its restructuring Nakheel was afforded committed equity funds of Dh16.6 billion, of which Dh1.4 billion was utilised. As for the balance, “These are available if we want it, but the situation does not exist now,” said Lootah. “It will remain with the Dubai Government.”
Meanwhile, claims totalling Dh8 billion with trade creditors and contractors are in settlement mode, while 77 per cent of those liabilities with property buyers in deferred projects and coming to Dh10 billion have been “mitigated”.