Nakheel takes the project finance route to raise funds

Local developer Nakheel is to move away from Islamic bonds and syndicated loans to raise funding through project finance.

'We are looking at other forms [of financing] and within the next six months we will do project, non-recourse financing,' says Chris O'Donnell, chief executive officer of Nakheel . 'As a developer, we need to be using debt as a way to improve our return on equity.'

Compared with Qatar and Saudi Arabia, few companies in the UAE use this form of financing, in which long tenor loans are repaid by the project's future cash flow. Companies usually favour corporate bonds.

'What Nakheel is doing is a novelty for this market,' says a Dubai-based banker.

O'Donnell is not worried about the potential impact of the global credit crunch on its plans. 'We are aware of the current sub-prime [US mortgage loan] issues, but there is still a lot of money looking for a home,' he says.

The company signed a $1,850 million ijara facility in August that followed a $3,520 million sukuk that listed on

the Dubai International Financial Exchange in 2006. As yet, the company has no plans to list shares.

'Our sukuk offering suggests we would look at [staging an initial public offering] one-two years out,' says O'Donnell. 'It is an option, but there are others.'

The company is preparing to launch its Nakheel International arm. 'We have

an international mandate and

we are working through our strategy,' says O'Donnell.