WORLD PROPERTY CHANNEL ®

(DUBAI, U.A.E.) -- Even the rich need a handout - preferably filled with green - now and then.

Dubai developer Nakheel, creator of the sheikhdom's internationally-promoted Palm Islands, confirmed Monday it is receiving funds from the United Arab Emirates government to complete more than $80 billion worth of projects in the emirate and restructure billions of dollars in debt.

The confirmation was made in an emailed statement to Zawya Dow Jones.

Nakheel representatives declined to say how much funding it has received so far, but  industry sources in a position to know put the figure at 2 billion U.A.E. dirhams ($543.5 million US).

Nakheel Chairman Sultan Ahmed bin Sulayem remains realistic over his company's financial bind.

"Everything we've committed to will be finished; everything that can't be currently financed will be delayed," bin Sulayem says.

The company, which is dredging three palm-tree-shaped islands off the city's coast, will delay planned projects but push ahead with existing developments "as the company adjusts to the realities of the crisis," according to bin Sulayem.

Zawya Dow Jones reports "the global financial crisis is taking its toll on Dubai,  with developers like Nakheel hardest hit amid a slump that has wiped an estimated 40% off the average price of real estate in the emirate."

Earlier this year, the Dubai government sold $10 billion of bonds to the U.A.E. central bank to raise capital to support state-linked companies hardest hit by the downturn. The emirate plans to issue another $10 billion in bonds later in the year.

EFG-Hermes, a leading investment bank in the Middle East and North Africa regions, confirms Dubai and its corporate entities have nearly $19 billion of debt coming due this year and next. Nakheel alone has a $3.5 billion bond due this year.

"The funding (by the UAE) will satisfy Nakheel's immediate need for payments to contractors," Nomura analyst Chet Riley tells Zawya Dow Jones.

"The company is currently offering its subcontractors and consultants a haircut on the amounts owed," he says. "The carrot is they get a 'payment guarantee.' The stick is that it won't be until September when we expect the next tranche of the Dubai bailout bond to be delivered," he says.

"The problem is that the government funding is not enough and does nothing to solve the issue of the $3.5 billion convertible expiring in December," says Riley. "Bond holders have been petitioned and it is highly probable they will have to restructure."

Several Dubai-based contractors are owed hundreds of millions of dollars by state-linked developers.

London-based Middle East Economic Digest reported last week that international construction companies, each owed $272 million in outstanding bills by government related clients, are threatening to walk out on projects unless they are paid.

On Sunday, Arabtec Holding, the U.A.E.'s largest construction company by market value, said it is has about AED3.6 billion in payments outstanding with about  80% of this from the government or quasi-government entities.

Arabtec, which is working on Nakheel's Al Furjan development and Jumeirah Village projects among others, plans to meet government officials this week to discuss payments.

In recent months, Nakheel, part of the vast business empire of Dubai's billionaire ruler Sheikh Mohammed bin Rashid Al Maktoum, has been forced to take drastic action to keep its business afloat, according to Zawya Dow Jones.

In March, Nakheel said it was delaying its $3 billion mall expansion plans by a year and merged some of its business units to "accommodate the current global environment".

It has also slowed work on some of its key projects in the emirate, including the Palm Jebel Ali and Nakheel Harbor & Tower, the one-kilometer tall centerpiece of a $38 billion commercial and residential project launched last October.

Work on the Palm Deira, the largest of three palm-shaped developments being dredged off Dubai's coast, and the Universe, is on hold.

Nakheel cut  500 jobs, or 15% of its workforce in November 2008.

---