Dubais Nakheel may revise terms of USD 750 million Sukuk
Friday, 17 Jul 2009
Khaleej Times reported that Nakheel has plans to revise the payment terms of its USD 750 million Sharia compliant bonds or sukuk, which matures in 2011.
According to a notice sent to investors by Deutsche Bank AG ,under the revised terms, Nakheel would decrease the coupon payment due later this month and increase the final amount payable on the bond redemption date. The next payment for the sukuk is due July 16th and the last is January 16th 2011. Investors may receive the next coupon payment on July 16th after accepting the new pricing formula.
The notice said that "If the proposed amendment becomes effective, it is expected that it should result in an increase in the amount of the final distribution amount payable to certificate holders on the redemption date."
Nakheel said that "The difference is minimal and favorable to sukuk holders." It said that the consent of sukuk holders was not required for the amendment but that the transaction administrator wished that sukuk holders be notified ahead of formal approval.
The developer of off-shore islands such as Palm Jumeirah and The World has been severely affected due to the global economic crisis and a sharp decline of real estate prices in Dubai. The company has 2 more outstanding sukuks USD 3.5 billion issue which matures in December 2009 and AED 3.6 billion sukuk which matures in May 2010.
Mr Philipp Lotter senior VP at Moody's Investors Service in the Middle East said that "This clearly highlights that Nakheel is addressing its funding structure. As long as bond holders do not lose out and agree to terms on a voluntary basis, this can be seen as a positive move. Questions remain however what the company's plans are regarding its more immediate bond maturity in December this year."
Even though the company has not announced any plans for its sukuk maturing in December, the issue of how Nakheel will handle redemption has been a matter of intense speculation. Some analysts expect Nakheel to redeem fully by tapping into the Government of Dubai's planned second tranche of USD 20 billion bond issue. The first tranche of the USD 10 billon was fully subscribed by the UAE Central Bank. Some other analysts are speculating that Nakheel might offer longer dated bond along with some cash component instead of a full redemption.
According to Mr Mohieddine Kronfol MD at Dubai based Algebra Capital and holder of Nakheel sukuk, the wording in the notice sent to investors recently introduces the possibility that the company paying back one of its bonds earlier than originally planned.
He said that "It also confirms the market speculation that a restructuring is being seriously contemplated and without additional information from the company this notice will further fuel speculation."
