Trade creditors in fresh Nakheel bonds sell off

24 October 2012

Secondary market trading at highest levels since the bonds were issued last year

Nakheel’s trade creditors have embarked on a fresh round of sales of the sukuk (Islamic bond) issued to them as part of the real estate firms $16bn debt restructuring.

Bond traders say that trading volumes in the Nakheel sukuk are at the highest levels they have seen since the first tranche was issued to creditors in September 2011. Pricing in the secondary market is now almost back to face value, after collapsing to as low as 68 cents on the dollar in the first trades after the deal was issued.

“There is definitely an abundance of sellers at the moment,” says Ahmad Alanani, Middle East director at Exotix. “Trade creditors are trying to sell and monetise their holdings before year end, as close to par as possible.”

Investors have been offering higher prices on the deal, attracted by the high coupon it offers. “There are plenty of yield hungry investors buying this at the moment, but as we see more selling from trade creditors that will put more pressure on pricing,” adds Alanani. Throughout much of October trading is understood to have been back up at almost face value.

Nakheel used the sukuk, which pays a 10 per cent annual coupon to holders, as part of its settlement with contractors and other non-bank creditors. Each creditor was given 40 per cent of their outstanding claims on Nakheel in cash, with the rest paid in the form of the sukuk. In total around AED4bn of sukuk has been issued to trade creditors.

The company said recently that for the first nine months of the year its profits were AED1.1bn, up 97 per cent from AED0.6bn in the same period of 2011. It is now trying to start developing new projects, including new retail and residential developments on the Palm Jumeirah.

A MEED Subscription...

Subscribe or upgrade your current MEED.com package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.