DUBAI (Reuters) – State-owned conglomerate Dubai World’s debt restructuring deal will hasten a similar deal for creditors of property developer Nakheel, analysts said, and acts as a precedent for other state-linked restructurings.
Dubai World reached near-unanimous approval for its $24.9 billion debt plan, it said in a statement on Friday, but flagship property arm Nakheel, undergoing parallel negotiations, has yet to secure backing for its plan.
“The conclusion of Dubai World’s debt restructuring program … opens the door to the debt restructuring of Nakheel,” Moody’s analyst John Tofarides said in a report on Monday.
“A successful conclusion of which would be another positive step toward resolving the outstanding debt issues of Dubai government-owned entities.”
Other government-related entities such as units linked to Dubai Holding, the conglomerate owned by Dubai’s ruler, are also in talks with bank lenders to reschedule debt payments.
An August 31 deadline for bankers to respond to Nakheel’s debt restructuring proposals presented in July was not met, sources close to the matter have told Reuters, without giving details on any new deadline.
“There has never been a hard deadline on Nakheel — only a soft one, which was not necessarily realistic,” one of the sources said.
“The only reason the Dubai World deadline was relevant was because of the consent fee, which is not the case on Nakheel,” the source said.
“There are one or two issues on Nakheel which means it is ongoing, such as the separate need for trade creditors to settle their claims, but there has never been a hard deadline for the bank process.”
Detailed terms of the multi-billion dollar restructuring, including rates of interest and repayment schedules for the syndicated and bilateral loans, were presented to bankers at the July meeting.
The Gulf emirate developer, which overstretched itself on projects such as building islands in the shape of palms, was forced to put several ambitious projects, such as a planned kilometer-high tower, on hold as a result of the downturn.
“We hope now that we will get more momentum on Nakheel and hopefully this will be sorted by the end of the year,” said Abdul Kadir Hussain, chief executive of Mashreq Capital in Dubai.
The government of Dubai said in a statement on Friday it is “pleased with the significant progress achieved by the company to date in discussions with its creditors.”
Nakheel — which has repaid two Islamic bonds worth $5 billion since Dubai shocked markets with a plan to delay debt repayments last November — is also in separate talks with its trade creditors and has begun making cash payments to them under a plan unveiled by Dubai in May.
The trade creditor plan offers full repayment, with 40 percent in cash and the rest via an Islamic bond, or sukuk, which has a 10 percent annual return.