(Reuters) - Developer Nakheel NAKHD.UL is in talks to extend 8 billion dirhams ($2.18 billion) in loans due in 2015, the indebted company’s chairman was quoted as saying in a local newspaper on Sunday.
Ali Rashid Lootah dismissed concerns over Nakheel’s ability to repay its debts, which also include a 3.8-billion dirham sukuk, or Islamic bond, due in August 2016, Abu Dhabi-based newspaper, The National, reported.
The government-owned builder agreed a $16 billion debt restructuring in 2011 and has scaled back grandiose plans such as building a one-kilometer high tower after becoming a high profile corporate casualty of the Dubai property crash.
Debts held by Nakheel, owned at the time by flagship conglomerate Dubai World DBWLD.UL helped trigger the emirate’s 2009 debt crisis. A last-minute bailout by Abu Dhabi helped Dubai avert a bond default on a Nakheel bond in December 2009.
“We are talking to financial institutions to restructure our loan, which is a normal part of business because the original tenure is very short,” Lootah said.
“We have time but we are talking to them from now and engaging them from now to get a longer term. We are not worried about the sukuk. Our strategy first will be deal with the lenders. The sukuk is a secondary issue to that.”
The bank loans under consideration are thought to be debt restructured under the 2011 agreement. This includes 6.76 billion dirhams in secured facilities provided by, among others, Dubai’s biggest bank Emirates NBD ENBD.DU as well as 470 million dirhams in unsecured facilities, all due in 2016, according to Nakheel’s sukuk prospectus and estimates by Exotix Limited.
“This is all previously restructured bank debt. They (Nakheel) are trying to refinance all of this debt before the majority falls due in 2016,” said Gus Chehayeb, director, Middle East and Africa Corporate Research at Exotix, in Dubai.
Nakheel reported a 57-percent rise in annual profit in January. It also made interest and profit payments of around 800 million dirhams to lenders last year and has paid around 10 billion dirhams to various trade creditors and contractors since the start of its debt restructuring.
“We have sorted all the old issues, most of the old issues,” Lootah told the newspaper.
But he ruled out re-starting work on Palm Jebel Ali, one of three man-made islands in the shape of palm fronds that Nakheel planned to build off the Dubai coast. Of these, only one - Palm Jumeirah - has been completed.
“Nakheel will grow and grow and grow in a more careful manner and with a more well-studied strategy and plan,” Lootah said. “Tourism is booming in Dubai so people are looking for more options, so we are looking at that.”
Last week, Dubai gave the go-ahead for a $1.6 billion artificial island, not connected to Nakheel, as it resumes extravagant developments, despite several stalled or abandoned projects commissioned during the previous decade’s boom.
Reporting by Matt Smith and Mala Pancholia; Editing by Helen Massy-Beresford