Nakheel bond may see price dip at start

Developer Nakheel's proposed bond sale to trade creditors may see its price fall initially as smaller contractors could sell to shore up their cash position, a top executive at Dubai builder Arabtec said.

Nakheel, builder of palm shaped islands off the coast of Dubai, plans to issue a Dh6 billion ($1.63 billion) Islamic bond as part of its debt repayment plan.

"My view is the smaller bondholders... will probably sell it as it will make a big difference to the cash flow and this will force the price probably initially to dip," Arabtec's Chief Financial Officer Ziad Makhzoumi said at the Reuters Middle East Investment Summit in Dubai on Monday.

Under Nakheel's restructuring plan, trade creditors have been offered 40 per cent of what they are owed in cash and the remaining 60 per cent through an Islamic bond or sukuk.

Makhzoumi said his firm itself would not hesitate to sell the Islamic bond but would only do so if it was trading at a premium.

"I am not going to sell it at a discount in that sense, but there are many companies that would consider that. If I get a premium, of course I'll sell. I will reduce my borrowings. At 10 per cent, if I get a premium, I will sell."

Makhzoumi disagreed that a big name like Arabtec selling Nakheel's bond would point to a lack of confidence in the market.

"I run a business, I don't think it will send the message there is no confidence. But if I get a decent offer that improves my liquidity, why not?" he said.

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