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Nakheel Likely to Offer Buyback of $3.5b Sukuk: Barclays Capital

(Bloomberg) / 26 June 2009

DUBAI - Real estate developer Nakheel PJSC may offer to buy back its $3.52 billion Islamic bonds before they come due in December, Barclays Capital said.

“A tender could be launched in the next few weeks, offering immediate cash payment at a discount,” Alia Moubayed, London-based senior economist for the Middle East and North Africa at Barclays Capital, said in a June 19 report, e-mailed on Thursday.

Nakheel may also offer to extend the maturity of the Islamic bond, or so-called sukuk, “on attractive terms,” he said.

The acceptance of the offer by international investors is likely to be low as many of them expect “the sukuk could be repaid in full upon maturity,” Moubayed said. Some local investors may prefer a maturity extension, she added.

Officials at Nakheel could not immediately be reached for comment.

Nakheel’s three-year bond due December 14 slumped to 63.5 cents to the dollar in February from an August high of 103.97 as world credit markets seized and Dubai suffered the world’s worst real estate slump after Latvia, deepening concern borrowers may default. The bond has rebounded since then, closing at 87 cents yesterday.

Nakheel doesn’t have the stand-alone capacity to repay its bond and will need government help, Philipp Lotter, a vice-president at Moody’s Investors Services Inc., said on June 10.

Dubai’s government will probably help Nakheel repay the bond as the developer qualifies for assistance from its $10 billion support fund, Nasser bin Hassan Al Shaikh, a former director-general of Dubai’s Department of Finance, said on May 16.

Positive Resolution

“We still expect a positive resolution, since avoiding default at the Dubai World level would be a positive catalyst for credit in the region,” Barclays’ Moubayed said.

Nakheel’s parent is Dubai World, a government-controlled group that also owns DP World Ltd., the world’s fourth-biggest container ports operator.

Dubai house prices fell an annual 35 per cent in the first quarter, trailing only the Latvian capital Riga’s 50 per cent slump, according to a survey by Global Property Guide.


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