Nakheel to issue sukuk by January 2011 – CEO

By Shane McGinley Available at: http://www.arabianbusiness.com/nakheel-issue-sukuk-by-january-2011-ceo-357102.html

Nakheel, the debt-laden real estate arm of state-owned conglomerate Dubai World, is aiming to issue a sukuk by January 2011 at the latest, its CEO has said.

The developer also has about 90 percent of acceptances by value among trade creditors for its debt restructuring, CEO Chris O’Donnell told Arabian Business.

“We are looking to complete the restructuring by the end of the year,” he said, speaking on the sidelines of an event held by the Association for Consultancy and Engineering (ACE) in Abu Dhabi.

Under Nakheel’s restructuring plan, trade creditors have been offered 40 percent of the money owed to them in cash, and the remaining 60 percent in the form of an Islamic bond, or sukuk.

Nakheel, the developer behind The Palm Dubai, needs 95 percent agreement among creditors to push ahead with its plan. The state-owned company has yet to secure the required backing, but is confident it will be able to close negotiations by the end of the year, O’Donnell said,

“We are 90 percent agreed so we have another 10 percent we are working through… There is nothing of major consequence. It is just finalising details that haven’t been readily available. There are no major issues,” he said, adding that creditors will receive full payment for all receivables.

The sukuk will then be issued shortly after restructuring is complete. Last month, Bloomberg reported that Nakheel was in preliminary talks with Nasdaq Dubai to list the bond.

“We are expecting that by the end of the year the sukuk will be launched and the issuance comes not long after that,” O’Donnell said. “It may be launched earlier… but our aim is to complete it by the end of the year.”

Nakheel has to date repaid AED3.4bn ($0.93bn) in cash payments to trade creditors, it said last month.

Nelson Ogunshakin, CEO of the UK-based ACE, confirmed that its members had begun receiving cash payments from Nakheel.

“A lot of them, if not all of them, have received the 40 percent agreed outstanding fee,” Ogunshakin told Arabian Business. “The other 60 percent has been confirmed. I thought it was [to be finalised in] November but at the latest the end of the year, again that is encouraging.”

The association in 2008 estimated that UK engineers and consultants were owed at least £250m (AED1.5bn) by Dubai developers caught in the property market crash.

“[Trade creditors] are getting 100 cents in every dollar. That is encouraging. Contrary to the rumour that was going on [that] for you’d only get 65 percent. That is not the case, for every one pound owed they will pay the one pound back,” said Ogunshakin.

Nakheel is planning to restart work on short-term projects within the next month, O’Donnell said, including sites such Jumeirah Park, Jumeirah Village, Al Furjan, Jumeirah Heights Clusters, Veneto and Badhrah.

“Undoubtedly, Shariah supervisory boards, academic councils, and legal seminars have given permission to Islamic banks to carry out certain operations that more closely resemble stratagems than actual transactions. Such permission, however, was granted in order to facilitate, under difficult circumstances, the figurative turning of the wheels for those institutions when they were few in number [and short of capital and human resources]. It was expected that Islamic banks would progress in time to genuine operations based on the objectives of an Islamic economic system and that they would distance themselves, even step by step, from what resembled interest-based enterprises. What is happening at the present time, however, is the opposite.

Islamic financial institutions have now begun competing to present themselves with all of the same characteristics of the conventional, interest-based marketplace, and to offer new products that march backwards towards interest-based enterprises rather than away from these.

Oftentimes these products are rushed to market using ploys that sound minds reject and bring laughter to enemies”.
By Sheikh Taqi Uthmani, President of the AAOIFI Shari’ah Council

Best Regards
ZULKIFLI HASAN
DURHAM, UK

Glasgow, Scotland