Nakheel bonds rose to their highest price in more than a year this week as speculation increased that the Dubai Government-controlled developer will repay a US$3.52bn (Dh12.93bn) debt due in December. Investors in Nakheel's $3.52bn Islamic bond could profit handsomely if the company pays off the debt as scheduled, analysts say. Repayment of the sukuk, which has emerged as one of Dubai's biggest financial challenges, is becoming increasingly likely as time goes on. A restructuring of the debt has long been rumoured, but with the start this week of Ramadan, typically a slow period for investors and markets, Nakheel is running out of time. "The window for a friendly organised restructuring is closing rapidly," said Abdul Kadir Hussain, the chief executive of Mashreq Capital. "At that point you're left with one of two options, which are a full repayment or the one none of us want to conceive of, which is potentially a default. And I think it's still highly unlikely that there would be any outright default." Nakheel, the developer of -Dubai's palm-shaped islands, has been forced to delay projects and cut jobs after property prices in the emirate dropped as business activity slowed and lending stalled because of the financial crisis. Nakheel's sukuk price started to fall last September, dropping 38 per cent to a low of 63.5 cents in February. As with other bonds, those falls reflected increased worry that Nakheel would default on the debt. It also pushed up the sukuk's yield, or the returns new investors could expect if the bond were to be repaid in full. In the past month, however, investors appear to have grown much more optimistic about being paid back. The sukuk's price has risen by 46 per cent since its lows in February, while its yield has fallen by 28 per cent in a month, reflecting increased confidence of a repayment that will leave investors whole. As a consequence, those who invested when prices were low and yields were high in February, March and April could stand to make substantial profits if Nakheel does pay off the bond, whether it raises the money from a syndicate of banks or finances repayment through its parent -company, -Dubai World. The company is set to pay back the bond at 115, or 15 per cent above par, meaning investors who bought when it was close to 60 would earn a return of about 90 per cent. "The guys who were able to buy the sukuk at its lows in March and April would have pretty much doubled their money," Mr Hussain said. "But even today this thing is trading in the low 90s, so if you buy this in the 92 to 93 price range and get paid 115 in four months, that's a 40 or 50 per cent yield on an annualised basis. That's still very attractive." The sukuk does come with risks attached, however. As its December maturity approaches, Nakheel has to juggle other obligations, including a payment of nearly $300 million this month on a syndicated Islamic bank loan it took out in 2007. It will have to pay another instalment on that loan next February. Another Dh3.6bn sukuk comes to maturity next May. How Nakheel and Dubai World handle these debts is widely seen as indicative of how the Dubai Government will address its overall debt load, which has been estimated at $80bn, incorporating the borrowings of state-linked companies. The emirate may finance these debts partly by tapping a bond programme it launched in February in which it is borrowing $20bn in two tranches. The first $10bn came from the Central Bank, and the second $10bn may come from the Central Bank, international investors, or a combination of the two. Nakheel said in May that it was receiving funds from the programme, but did not reveal how much. afitch@thenational.ae
Killing of Qassem Suleimani
National Editorial: Suleimani has been killed, now we must de-escalate
Mina Al Oraibi: Air strike casts a long shadow over the decade ahead
Jack Moore: Why the assassination is such a monumental gamble
Matthew Levitt: Iran retains its ability to launch terror attacks
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Europe’s rearming plan
- Suspend strict budget rules to allow member countries to step up defence spending
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- Use the existing EU budget to direct more funds towards defence-related investment
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- Create a savings and investments union to help companies access capital
World Mental Health Day
Analysis
Members of Syria's Alawite minority community face threat in their heartland after one of the deadliest days in country’s recent history. Read more
The National's picks
4.35pm: Tilal Al Khalediah
5.10pm: Continous
5.45pm: Raging Torrent
6.20pm: West Acre
7pm: Flood Zone
7.40pm: Straight No Chaser
8.15pm: Romantic Warrior
8.50pm: Calandogan
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Killing of Qassem Suleimani
National Editorial: Suleimani has been killed, now we must de-escalate
Mina Al Oraibi: Air strike casts a long shadow over the decade ahead
Matthew Levitt: Iran retains its ability to launch terror attacks
Damien McElroy: A CEO tasked with spreading Iran's influence
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Simon Waldman: Cautious Israel keeping a low profile
Mohammed bin Zayed Majlis
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• News has a bright future and the UAE is at the heart of it
• Architecture is over - here's cybertecture
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Results
6.30pm: Maiden Dh165,000 (Dirt) 1,600m
Winner: Celtic Prince, David Liska (jockey), Rashed Bouresly (trainer).
7.05pm: Conditions Dh240,000 (D) 1,600m
Winner: Commanding, Richard Mullen, Satish Seemar.
7.40pm: Handicap Dh190,000 (D) 2,000m
Winner: Grand Argentier, Pat Dobbs, Doug Watson.
8.15pm: Handicap Dh170,000 (D) 2,200m
Winner: Arch Gold, Sam Hitchcott, Doug Watson.
8.50pm: The Entisar Listed Dh265,000 (D) 2,000m
Winner: Military Law, Antonio Fresu, Musabah Al Muhairi.
9.25pm: The Garhoud Sprint Listed Dh265,000 (D) 1,200m
Winner: Ibn Malik, Dane O’Neill, Musabah Al Muhairi.
10pm: Handicap Dh185,000 (D) 1,400m
Winner: Midnight Sands, Pat Dobbs, Doug Watson.
Neighbourhood Watch
Towering concerns
The burning issue
The internal combustion engine is facing a watershed moment – major manufacturer Volvo is to stop producing petroleum-powered vehicles by 2021 and countries in Europe, including the UK, have vowed to ban their sale before 2040. The National takes a look at the story of one of the most successful technologies of the last 100 years and how it has impacted life in the UAE.
Read part three: the age of the electric vehicle begins
Read part two: how climate change drove the race for an alternative
Read part one: how cars came to the UAE
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Who has been sanctioned?
Daniella Weiss and Nachala
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Harel Libi & Libi Construction and Infrastructure
Libi has been involved in threatening and perpetuating acts of aggression and violence against Palestinians. His firm has provided logistical and financial support for the establishment of illegal outposts.
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Runs a settler outpost named Zohar’s Farm and has previously faced charges of violence against Palestinians. He was indicted by Israel’s State Attorney’s Office in September for allegedly participating in a violent attack against Palestinians and activists in the West Bank village of Muarrajat.
Coco’s Farm and Neria’s Farm
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Killing of Qassem Suleimani
National Editorial: Suleimani has been killed, now we must de-escalate
Mina Al Oraibi: Air strike casts a long shadow over the decade ahead
Jack Moore: Why the assassination is such a monumental gamble
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NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
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Director: Jesse Armstrong
Rating: 3.5/5
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Engine: 4-litre V8 twin-turbo
Power: 630hp
Torque: 850Nm
Transmission: 8-speed Tiptronic automatic
Price: From Dh599,000
On sale: Now
Skewed figures
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Jack Moore: Why the assassination is such a monumental gamble
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Name: Back to Games and Boardgame Space
Started: Back to Games (2015); Boardgame Space (Mark Azzam became co-founder in 2017)
Founder: Back to Games (Mr Azzam); Boardgame Space (Mr Azzam and Feras Al Bastaki)
Based: Dubai and Abu Dhabi
Industry: Back to Games (retail); Boardgame Space (wholesale and distribution)
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Killing of Qassem Suleimani
National Editorial: Suleimani has been killed, now we must de-escalate
Jack Moore: Why the assassination is such a monumental gamble
Matthew Levitt: Iran retains its ability to launch terror attacks
Damien McElroy: A CEO tasked with spreading Iran's influence
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Tomorrow 2021
What's in the deal?
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India will slash levies on medical devices, machinery, cosmetics, soft drinks and lamb.
India will also cut automotive tariffs to 10% under a quota from over 100% currently.
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National Editorial: Suleimani has been killed, now we must de-escalate
Mina Al Oraibi: Air strike casts a long shadow over the decade ahead
Jack Moore: Why the assassination is such a monumental gamble
Matthew Levitt: Iran retains its ability to launch terror attacks
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Read part four: an affection for classic cars lives on
Read part three: the age of the electric vehicle begins
Read part two: how climate change drove the race for an alternative
