Jan. 23 (Bloomberg) -- Nakheel PJSC, the Dubai developer that was rescued by the government in 2009 after a property crash, said it may refinance its Islamic bonds this year after reporting a 57 percent increase in annual profit.
The company, which built palm-shaped islands off Dubai’s coast, has received offers from local and foreign banks to refinance its sukuk, on which it pays annual interest of 10 percent, Chairman Ali Rashid Lootah said at a press conference in Dubai today. “Refinancing will not be an issue,” he said.
Profit rose to 2.02 billion dirhams ($549 million) from 1.28 billion dirhams a year earlier, the company said in a statement. Revenue jumped 91 percent to 7.8 billion dirhams as the company handed over more homes and sold land, Lootah said.
Nakheel was on the brink of a debt default in 2009 before being rescued by the Dubai government’s support fund, which pledged 26.8 billion dirhams in equity. Property prices in Dubai, the second-biggest of seven states that make up the United Arab Emirates, crashed by 65 percent from their peak in 2008 as speculators fled and banks cut back on mortgage lending after the onset of the global credit crisis.
The company restructured 27 billion dirhams of bank and trade creditor liabilities as part of a plan to return it to health. Nakheel is settling 60 percent of its bills to trade creditors in the form of Islamic bonds and has issued 4.2 billion dirhams of it so far, Chief Executive Officer Sanjay Manchanda said at the briefing. The company also has 8 billion dirhams in bank debt, he said.
Nakheel plans to hand over about 3,000 homes this year and will invest in projects with a value of 6.5 billion dirhams that are due to be completed over the next three years. The company generated 4 billion dirhams in cash last year, Manchanda said at the press conference.
Home prices in Dubai are making a nascent recovery, helped by the emirate’s status as a haven from political turmoil in the Middle East. The average sale price of a mid-range villa soared almost 30 percent in the year to November, while mid-range apartment prices advanced 16 percent, according to data compiled by Cluttons LLC in Dubai.
Dubai’s Department of Finance yesterday raised $1.25 billion from the sale of 10-year sukuk and 30-year bonds that received $14.8 billion in bids, reflecting investors’ appetite for paper from Dubai. Dubai’s 10-year sukuk pays a coupon of 3.875 percent, data compiled by Bloomberg shows.
Dubai’s economic growth is estimated to have accelerated to 4.3 percent last year from 3.8 percent in 2011, helped by a rebound in tourism and retail industries, according to the Dubai Media Office. Last year’s growth is set to be the fastest in five years.
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