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Nakheel Bond Prices Double 
on Abu Dhabi Support Pledge

DUBAI - Nakheel PJSC bond prices doubled after Abu Dhabi provided $10 billion to help parent company Dubai World meet its financial obligations.

“Remarkable is the only way to describe the announcements,” Timothy Ash, head of Europe, Middle East and Africa research at Royal Bank of Scotland Group Plc in London, said in a research note. “It will no doubt leave a bitter aftertaste for many.”

The bailout announcement lifted Nakheel’s Islamic bonds due 2011 to 81.4 cents from 36 on December 11, according to Citigroup Inc. prices at 10:45 am in London.

Prices on the bonds due on December 14 rose to 109.5 cents on the dollar from 53 cents, the biggest gain in at least two years. The debt redeems at 115.52 cents, increasing the total payment to $4.1 billion. The amount includes a 6 per cent premium to bondholders because the company didn’t sell shares in an initial public offering during the life of the bond, and the remaining part of the annual coupon.

The bailout means holders of the remaining Dubai World debt will expect full repayment, according to London-based Calyon.

The remaining portion of the debt restructure “could now prove difficult given those debt holders may be looking for a full bailout along the lines of the Nakheel bond,” Harpreet Parhar, credit strategist at Calyon, wrote in a note to investors.

Bloomberg