UPDATE 1-Dubai repays $980 mln Nakheel bond on schedule

* Nakheel’s $980 mln Islamic bond repaid -sources

* Timely repayment seen as positive for region

* Dubai International Capital says able to refinance loan

* Nakheel says 50 pct trade creditors approve repayment plan

(Adds details on bond, trade creditors approval of debt plan,
Dubai International Capital refinancing)

By Shaheen Pasha and Dinesh Nair
DUBAI, May 13 (BestGrowthStock) – Dubai repaid a $980 million
Islamic bond issued by developer Nakheel while another
state-owned firm said it was confident of refinancing an
upcoming loan as it digs out from a massive debt burden.

Nakheel, builder the palm-shaped artificial islands off
Dubai, repaid the bond on schedule as talks continue between its
parent Dubai World [DBWLD.UL] and lenders to restructure $24.8
billion in debt.

“It’s a good first step and the right thing to do,” said
Khuram Maqsood, managing director at Emirates Capital. “If they
had defaulted on the current payment, that would have been a
setback for the restructuring process.”

“It looks as though the process is moving on as per the
expectations of the market,” John Bates, head of fixed-income at
Silk Invest in London, said of Nakheel’s bond repayment.

“This should be positive for the region.”

A Dubai government spokeswoman said the funds to repay the
bond had been sent to the paying agent, Deutsche Bank, and
sources with knowledge of the situation confirmed the funds had
been paid out. [ID:nWEA2235]

Dubai shocked global markets last year when it unveiled
plans to delay repaying $26 billion in debt as it restructured
state-owned conglomerate Dubai World. It unveiled a $9.5 billion
rescue plan for the firm in March. [ID:nLDE62O010].

A debt deal may come in about two weeks, the head of the
Dubai Supreme Fiscal Committee Sheikh Ahmed bin Saeed al-Maktoum
told Reuters on Wedneday.

Investors, worried about a lack of transparency, are
fretting about the risk of more debt problems at Dubai-linked
entities. Speculation has centred on Dubai Holding — owned by
the emirate’s ruler, Sheikh Mohammed bin Rashid al-Maktoum —
which has about $10 billion in outstanding debt.

Dubai International Capital, the overseas investment arm of
Dubai Holding, reiterated on Thursday it would refinance its
upcoming June loan.

“We are confident of our ability to refinance the $1.25
billion loan and we continue to service our debt obligations as
usual,” said a spokeswoman.

Strategist Omair Ansari at Gulfmena Alternative Investments,
said investors were more focused on global, rather than
regional, risk in the wake of the Greek debt crisis.

“The (Dubai) risk is priced in and all the bad news is out
there. Transparency is definitely going to be an issue … it
does add pressure for the government to step up their game,” he
told Reuters Insider television.

For Reuters Insider interview with strategist Omair Ansari



Nakheel said it had received 50 percent approval from its
trade creditors for its repayment plan, still shy of the 65
percent necessary. [ID:nLDE64C05O]

Nakheel trade creditors have been offered full repayment,
with 40 percent in cash and the rest with an Islamic bond, or
sukuk, which has a 10 percent annual return.

Dubai World is still in talks with a core panel of seven
banks, including four U.K. banks, on the debt plan, which offers
the bank lenders full repayment in two tranches over five and
eight years at 1 percent interest and 1 percent payment-in-kind.

The disparity between the two offers has been a sticking
point for some lenders, who feel that Nakheel has been offered a
far better deal on the interest rate.

Uncertainty over Dubai World’s restructuring process has
weighed on the bonds of other Dubai-related names, pushing their
values below par.

Bond prices reflected market confidence in the run-up to the
payment. Nakheel’s May 2010 bond (XS0361130148=DBAB: ) was quoted
at 99.5 cents to the dollar on Thursday, data from Deutsche Bank
Autobahn showed.

The developer has another $1.2 billion Islamic bond maturing
on January 2011.

Investment Basics
(Editing by Karen Foster)

UPDATE 1-Dubai repays $980 mln Nakheel bond on schedule