UK contractors may not be paid until May 2010 as owner of developer Nakheel seeks delay on $60m debt
Dubai’s government has asked creditors of Dubai World, the state-owned company that owns major developer Nakheel, for a six month freeze on paying its debts. The government has meanwhile called in accountants Deloitte to advise on restructuring its $80bn debt pile, of which Dubai World owes $60bn.
The news will come as a blow to the masses of construction consultants and contractors owed money in Dubai. The Association of Consulting Engineers says UK engineers working in the UAE are owed at least £500m. While contractors are owed larger amounts - the UAE’s biggest contractor, Arabtec, for example, is owed around £500m. The payment problems began a year ago when Dubai went into a downturn, leading to around 500 major projects being either cancelled or put on hold in the past 12 months.
If the creditors agree to the debt “standstill”, Dubai World will not have to start paying off its debts again until 30 May 2010, including the repayment of a $4.05bn bond issued by Nakheel, the developer of the Palm Islands.
Dubai’s $80bn debt was borrowed on a short term basis, with all of it due to be repaid in the next three years.
Yesterday the Dubai government issued another $5bn tranche of its $20bn bond programme, launched in March this year when it issued $10bn. The remaining $5bn is expected before the end of the year. The first $10bn was bought by the UAE Central Bank in the capital Abu Dhabi, amounting to a federal bailout.