Dubai property developer Nakheel has approached banks to refinance outstanding debt, sources said, amid an economic downturn which is exacerbating property oversupply problems and has raised concerns over Dubai’s debt sustainability.
State-owned Nakheel, developer of Dubai’s palm-shaped islands, was forced into a massive debt restructuring in the aftermath of the emirate’s 2009-2010 real estate crash, when the company was one of the hardest-hit.
It has recently approached banks to refinance multiple outstanding loans, said three sources familiar with the matter, without disclosing the amount of debt involved.
The refinancing would include debt Nakheel raised for the development of its Deira Mall project, two of the sources said.
“As part of our usual business operations, we are in discussions with lenders and will announce further details as appropriate in due course,” Nakheel told Reuters in a statement.
Dubai’s real estate sector, sluggish for most of the past decade, has been hit further by the coronavirus pandemic. A flurry of construction for the Expo 2020 world fair, which has been delayed by a year to October 2021, has exacerbated oversupply problems.
Nakheel slashed salaries by as much as 50 percent earlier this year, sources have said. Its chief executive resigned in March.
Dubai and government-related entities face some $10 billion in debt repayments this year, Bank of America has said, while the economy could shrink by 11 percent, according to S&P Global Ratings.
The 6.1 billion dirhams ($1.7 billion) Deira Mall is meant to be one of the region’s largest with a net leasable area of 4.5 million square feet, according to Nakheel’s website.
Nakheel said this month that, despite challenges caused by the pandemic, it had sold almost 250 properties with a total sales value of over 600 million dirhams in the last four months.