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Clifford Chance advises Nakheel on landmark restructuring

29 August 2011

Clifford Chance advises Nakheel on landmark restructuring

Clifford Chance has advised Nakheel PJSC on the successful restructuring of liabilities in a total amount in excess of US$16bn, which closed last week. The amount and the nature of the liabilities involved and the large number of creditors made this one of the most complex restructurings in the region to date requiring the assistance of a large multi-disciplinary team. The restructuring also included the legal separation of the Nakheel PJSC group from the rest of the Dubai World group.

Nakheel's liabilities comprised bank debt, sukuk, government debt, trade creditor liabilities, customer liabilities and inter-group debt. The bank debt facilities included a mixture of both conventional and Islamic facilities and a number of hedging arrangements. More than 30 financiers were involved on the debt restructuring side, the implementation date for which occurred on Wednesday 24 August.

The restructuring also involved a unique trade creditor settlement structure due to the complex nature and range of claims involved. This included an agreed claims resolution procedure and importantly an element of up front/ pre- completion distribution of settlement payments in order to ensure remobilisation/continuation of works at Nakheel's high profile property developments.  Agreed trade creditor claims remaining outstanding after the up front payments are to be settled by way of sukuk, AED3.8bn of which were successfully issued by Nakheel to trade creditors on Thursday 25 August (immediately following the implementation date for the bank debt restructuring having been declared). Tap issuances will follow as further claims are agreed. The use of sukuk to settle outstanding trade creditor claims marks a first for a restructuring in the Middle East and the structure is also the first sukuk to allow for a tap issue to be fungible with a pre-existing issued series.

It is also worth noting that the separation of the Nakheel PJSC group and the Dubai World group, being such intricately linked organisations with cross shareholdings and shared functions, was a huge undertaking. This also involved the settlement of numerous inter-group liabilities and a large number of asset transfers.

Robin Abraham, Partner, Dubai, comments: "We were delighted to be working with the Nakheel team on such a ground breaking and high profile deal. It took a Herculean effort on the part of our banking, capital markets and corporate teams to close the bank and trade creditor restructurings as well as the legal separation from the Dubai World Group all in the same week."

The Clifford Chance restructuring team was led by London Partner, Mark Hyde and Dubai Counsel, Debbie Walker. The restructuring advice was provided by London Partners Mark Hyde and Adrian Cohen and supported by Melissa Coakley, Catherine Bridge and Jeanette Best. The bank debt team was led by Dubai Counsel, Debbie Walker and supported by Michael Evans, Chris Page and Nilon Akther, with Dubai Counsel Steven Henderson assisting on real estate issues. The capital markets Sukuk team was led by Dubai Partner, Debashis Dey, with the support of Dubai Partner Qudeer Latif, Associates Greg Man, Mark Dickinson, Pavandeep Gill and Alekhya Prakash as well as US law Partner Bob Trefny and US law Associates Terrence Maloney and Jame Ortiz. The separation was led by Senior Associate Melissa Coakley, Dubai Counsel James McCarthy and Dubai Counsel Debbie Walker, who were supported by John Coleman.

In addition to the work undertaken on the restructuring, members of the Clifford Chance Dubai litigation team regularly appear before the Dubai World Tribunal to represent Nakheel in claims involving trade creditors.