Nakheel board sacked as debt rescheduling talks continue
The Government of Dubai has sacked the entire board of Nakheel, the developer of the Palm islands trilogy and other ambitious real estate developments, whose $24.8 billion debt mountain is now the subject of intense restructuring negotiations.
Nakheel chairman Sultan Ahmed bin Sulayem has been replaced by Mashreqbank vice-chairman, Ali Rashid Lootah. Other new board members appointed yesterday include Khalid Mohammad Salim Bakheit, Khalil Eisa Ahmed Awad, Adel Khalifa Al Shaer and Ebrahim Hussain Al Fardan.
CEO Chris O’Donnell was also dismissed from the board, and his position is now subject to the approval of the new board. No CEO could continue without the support of a new board.
The dismissal of the old Nakheel board was not unexpected in the wake of the proposal made to reschedule the group’s $24.8 billion debts last week. Indeed, the banks were bound to insist on new board, management team and business plan for Nakheel before they agree to the new terms.
The banks will want no confusion as to what the loans are for, or who is in charge of fulfilling this plan. So far the indications from banking sources over their reaction to last week’s rescheduling proposal has been mixed, with some banks concerned about the unequal treatment of Nakheel bond and loan creditors.
Solid proposals for the future of Nakheel, of which changing the board is a first step, are likely to go a long way to convincing the banks that the proposals are worth supporting.
Aidan Birkett, the chief restructuring officer or administrator, has said the new debt deal will put Nakheel on ‘a stable financial footing’. But the banks will hardly be writing blank checks for Dubai to pursue more mega projects with their money. A solid business plan is needed, most likely with management not associated with the previous excesses.
It is not clear if the banks will be able to reach a settlement before the next $980 million Nakheel bond that falls due on May 13 or whether Dubai will again have to dip into the funds it received from Abu Dhabi to pay this debt.
Some more news on management structure and business strategy might speed things up.