A council overseeing the restructuring of Dubai's chief conglomerate said Tuesday a new board had been named to oversee the restructuring of the deeply indebted Dubai World property development unit Nakheel.
The announcement marked the latest effort by Dubai to steer its chief engine for growth through a minefield of debt that has sullied the one-time Arab boomtown's reputation as the Mideast's premier investment destination.
It comes just days after Dubai said it would pump $9.5 billion into Dubai World to help restructure the company's $26 billion in debts. Much of the money allotted under the restructuring plan was earmarked for Nakheel, the company behind Dubai's iconic manmade islands — many of which sit empty due to the property bust linked to the global economic meltdown.
Dubai World Chairman Sultan Ahmed Bin Sulayem welcomed the new Nakheel board Tuesday and said in a brief statement its members will have the conglomerate's "full support."
An earlier statement from the Dubai ruler's media office said the new board "will work on implementing the main remaining projects, which will be specified in accordance with the company's priorities over the coming period in a manner guaranteeing its various responsibilities to the different parties."
The broader restructuring plan offers creditors full repayment on the principal of their outstanding loans over a five to eight year period through the issuance of new debt. The plan calls for restructuring of $23.5 billion of the debts, which include $14.2 billion to creditors other than the government.
Nakheel's woes, like those of its parent company and Dubai, as a whole, were linked in large part to the global financial crisis.
The emirate — one of seven semiautonomous city-states making up the United Arab Emirates — relied on years of cheap credit to fuel its stratospheric growth. But the financial crisis dried up the easy money and pummeled property prices in Dubai by as much as 50 percent. Nakheel took a hammering partly because it contributed to the property glut that stemmed from the building boom.
When the bills came due, Dubai World announced in November it wanted a six month delay in repaying the money and creditors discovered that the loans which they assumed were backed by the city-state's government in fact had no such guarantees.
Of the total money to be injected into the ailing conglomerate under the restructuring plan, $8 billion in new funds was set aside for Nakheel, a company viewed as a linchpin in Dubai's transformation from a small, desolate trading port in the Persian Gulf to a glimmering oasis with towering skyscrapers and aspirations to become the Mideast's version of Singapore, Wall Street and Las Vegas, rolled into one.
Key in Nakheel's portion of the restructuring plan was that the company's outstanding Islamic bonds would be paid on maturity this year and the next. The developer, in what was seen as a litmus test of Dubai World's overall situation, paid roughly $4 billion on a maturing Islamic bond in December.
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