Finance Channel

Nakheel PJSC, the property developer owned by Dubai World, plans to offer lenders interest of 4 percentage points more than benchmark rates as it seeks to restructure $10.5 billion of debt, according to two bankers with knowledge of the plan.

Nakheel, the state-owned builder of a palm tree-shaped island development off Dubai’s coast, will offer the new interest rate on its loans in dollars and dirhams at a meeting tomorrow, said the bankers, who declined to be identified because the matter is private. In return, lenders would agree to extend the lifetime of the loans by five years, the people said.

The proposed terms aren’t final, according to one of the people. The loans make up part of the debt that Nakheel is seeking to reorganize, which also includes outstanding payments to suppliers and contractors. The spreads will be over the Emirates interbank offered rate or the London interbank offered rate, the bankers said.

Spokesmen for Dubai World and the state’s Department of Finance, which has pledged $8 billion to Nakheel, declined to comment.

Nakheel said March 25 that its secured bank creditors will receive 100 percent of their principal and accrued interest under an agreement to extend the maturities of its loans. The developer has one dollar loan outstanding, a $1.85 billion facility that was signed in August 2007 and is currently due to expire in 2012, according to data compiled by Bloomberg.

The borrower said June 30 it had begun settling bills from its biggest trade creditors, involving a payout of 4 billion dirhams ($1.1 billion.)

Nakheel and parent Dubai World, one of the emirate’s three main state-owned holding companies, are seeking to renegotiate terms on their debt after the deepest financial crisis since the 1930s roiled the emirate’s real-estate market and left companies unable to raise new funding. Property prices have fallen more than 50 percent in the city state as banks cut mortgage lending.

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