DUBAI, Feb 15 (Reuters) - Dubai property developer Nakheel is seeking to borrow 5 billion dirhams ($1.4 billion) from banks, sources aware of the matter said, in what would be its first attempt to raise sizeable debts since it almost collapsed at the turn of the decade.
Nakheel, at the centre of a debt crisis in Dubai in 2009 after a crash in real estate prices, is in talks with a small group of banks regarding the financing, the sources said, adding talks were at a preliminary stage.
The state-owned developer, whose flagship Palm Jumeirah project ranks as the world’s biggest man-made island, has asked banks to provide it with prospective pricing if it borrowed for eight- to 10-year terms, said two of the sources, who declined to be identified as the information is private.
The company declined to comment on the loan talks.
Nakheel will use the funds for construction projects, one of the sources said.
Nakheel, like many corporations and financial institutions in the Gulf, is looking to tap debt markets as the cost of borrowing in the Gulf is expected to move higher in coming months, due to declining banking sector liquidity and rising U.S. interest rates.
Nakheel was one of the developers worst hit by Dubai’s real estate crash at the turn of the decade. A drawn-out process led to it restructure debt worth nearly $16 billion.
The property sector has since rebounded and Nakheel paid off its pre-crisis bank debt four years ahead of schedule. Property prices in Dubai were among the fastest-rising in the world in the 18 months to June 2014, although prices have softened since then.
In response to a question from Reuters, a spokeswoman for Nakheel said the company already had sufficient capital to cover the repayment of its 4.4 billion dirhams sukuk maturing in August 2016.
The company is planning to develop 10 new hotels across Dubai and on Monday signed a joint venture agreement with Spain’s RIU Hotels to open a hotel at Nakheel’s Deira Islands master development. The mixed-use development will add 40 kilometres to Dubai’s coastline. ($1 = 3.6729 UAE dirham) (Editing by David Holmes)