UK firms warned that Dubai developer may not be able to meet five-year repayment plan

The chief executive of the Association of Consultancy and Engineering (ACE) has warned companies to write off “sukuk” bonds from indebted Dubai developer Nakheel.

Nelson Ogunshakin said the five-year bonds, which are being issued by Nakheel to cover most of its debt, may not be redeemable.

Speaking at the ACE Gulf conference this week, Ogunshakin said: “The question is whether you will get your 100% at the end of the five years. If you are a registered company, the prudent thing would be to write it off.”

He said about £250m in unpaid fees was still owed by Nakheel to UK consultants on projects stalled by the collapse of the real estate market a year ago.

Nakheel is finalising a plan to pay creditors 40% in cash up front, and 60% in sukuk bonds, which are redeemable in five years and pay a return of 10% a year.

Nakheel chief executive Chris O’Donnell told conference delegates, many of whom are still owed money, that the developer would reach an agreement on the plan with creditors before the end of the year, after which the sukuk would be issued.

“You’re asking me when will the sukuk be issued - well I’m saying I think it’s going to be by December,” O’Donnell said.

“The sukuk will be issued once we get 95% of trade creditors by value signed up. We’re 85-90% there. The banks need to sign up their agreements as well. We’re looking at pretty much 100 cents in the dollar.”

He told the conference that 7-8bn dirhams (£1.2-1.4bn) worth of work on eight “shorter-term” Dubai developments would be restarted, including the Palm Jumeirah, Jumeirah Park,

nternational City and the World man-made island complex.

Other projects such as the two unfinished Palm complexes and the man-made Universe island, conceived at the height of the Dubai property bubble, were “longer-term” aspirations, O’Donnell said.

Asked whether any projects had been cancelled, O’Donnell said: “We prefer to call them long-term projects. The thing about Dubai is never say never. Certainly the Universe reclamation is a long, long-term project.”

“We think the general oversupply [in the Dubai property market] will be cleared in three to five years,”he said.

Rod MacDonald, chairman of Buro Happold, said O’Donnell “could have been a little more apologetic or a bit more thankful to the companies that have been funding his business for the past two years”.

Sukuk bonds are financial instruments formulated to allow credit to be issued without charging interest, which is illegal under Shariah law.