DUBAI, United Arab Emirates, (AP) — The indebted Dubai property developer behind the city’s manmade islands on Wednesday paid out the first of more than $1 billion worth of payments to cover its long overdue bills.
Nakheel, the main real estate arm of struggling state conglomerate Dubai World, rose to prominence during the city-state’s property boom that crumbled as the global financial crisis gathered steam in 2008, eventually sending prices falling by at least half from their peak.
The company’s new chairman called the beginning of the payments a sign of “significant progress” as the company works to get back on its feet.
“We thank our partners for their continued patience and understanding during the restructuring process,” said Ali Lootah, who became chairman after the company laid out its new payout plan in March.
Under the terms of the deal, Nakheel’s largest contractors and suppliers will get 40 percent of the money they are owed in cash and the rest as a tradable bond paying 10 percent interest. The bonds are set to be issued in the coming months.
Nakheel has the support “in principle” of contractors representing more than 75 percent of claims, a spokeswoman said, declining to be named in line with company policy. She said the cash payments are worth a total of 4 billion dirhams, or $1.09 billion.
Smaller contractors owed less than 500,000 dirhams, or about $136,000, apiece have been paid outright in cash already.
Parent company Dubai World reached a deal with its leading financial backers last month to restructure $23.5 billion worth of debt, including Nakheel’s.
Nakheel grew fast during Dubai’s boom years, which were fueled by easy credit and rising crude prices that boosted the region’s spending power. But it was hit hard when the world economy faltered.
Squeezed for cash, it was forced to lay off staff and shelve numerous high-profile projects, including a skyscraper that would climb higher than the city’s Burj Khalifa, already the world’s tallest.
Among its most recognizable projects are manmade islands in the shape of palm trees and a map of the world. Most of the islands have not yet been built upon.