To the surprise of many, the security on Nakheel’s latest sukuk is not as robust as hoped. The sukuk, which has been issued to trade creditors to settle unpaid bills as part of Nakheel’s debt restructuring, has some land in the Dubai Waterfront as its security. Unfortunately that land does not yet exist.

Creditors had also been promised that Nakheel would provide an independent valuation of the land used as security for the sukuk. It has not done so, presumably because valuing a piece of land that does not exist is quite difficult.

For many of Nakheel’s beleaguered trade creditors, who have waited several years to be paid for work done before the Dubai-government owned developer was engulfed in a debt crisis in 2009, it was the final sign that they should sell the bonds now. Waiting until 2016 to see if Nakheel would be able to repay the sukuk and collecting the 10 per cent yield along the way, seems even less attractive when you need the money now.

The concerns about the security on the Nakheel sukuk echo the worries financial creditors had about Nakheel in 2009. Back then, many thought the company’s debts would be guaranteed by the government of Dubai. Although Nakheel’s bonds were eventually paid off, it was more because of Abu Dhabi’s financial assistance than a Dubai guarantee.

Nakheel, and other government owned firms that racked up huge debts before 2009, have largely succeeded in pushing out their repayments for a few extra years.

But as the selling on of the latest Nakheel sukuk shows, skepticism about the future of these companies remains.