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It was always going to be a tough crowd. Last October, Chris O鈥橠onnell, chief executive of burst balloon Dubai developer Nakheel, stood in front of dozens of UK consultants to tell them why they should trust him. And, more importantly, when they were going to get some of their unpaid 拢250m back in the controversial form of sukuk bonds. 鈥淚 think it鈥檚 going to be by December,鈥� he said, with a rather nervous Antipodean twang.

But it wasn鈥檛 to be. Just before the new year, the company announced that it wasn鈥檛 going to issue the sukuks, a form of Islamic bond, in 2010. It had only secured the agreement of 91% of its creditors to its repayment plan, 4% short of its target. For those who lined up in the awkward coffee break after O鈥橠onnell鈥檚 speech to ask where their money was, this is just the latest chapter in Nakheel鈥檚 long-running saga
(see Timeline, page 22). Now the signs are that some kind of sukuk issue might not come until at least March. Although some consultants are beginning to dip their toes in Nakheel鈥檚 waters once again, many have decided to burn their bridges.

The world woke up in November 2009 to find that the booming emirate they had invested so much in was on the verge of defaulting on its debts. Only a bailout by neighbouring emirate Abu Dhabi - which has the oil reserves Dubai lacks - saved it from going over the edge. But a delay in repayments by Nakheel鈥檚 parent company, the state-backed Dubai World, meant that
UK consultants were initially left 拢500m out of pocket.

Getting creditors to agree to wait for billions of pounds was always going to be difficult. The negotiations started badly. Nakheel was perhaps over-fastidious in checking that companies were actually owed what they claimed, says one senior source in a UK engineer, and this slowed down the process and created some bad blood. 鈥淭here is an enormous bureaucratic process to get the debt ratified - spreadsheets that you aren鈥檛 sure are necessary,鈥� the source alleges - although, to be fair to Nakheel, it could have been an attempt to prevent a claims free-for-all. The developer told 好色先生TV these negotiations were 鈥渃onfidential鈥�.

Staff churn at Nakheel following the crash also made it more difficult for companies to communicate with the developer, says the source. 鈥淏efore the crash they were pretty easy to deal with but after the meltdown you had to deal with lots of different people. You try to find out what鈥檚 going on and it鈥檚 moved to someone else.鈥�

Nakheel鈥檚 offer to creditors

Since Nakheel last April announced its plan to pay off creditors 40% in cash immediately, and 60% in sukuk bonds that would pay a return of 10% a year and become redeemable in five years, progress has been made. In October, O鈥橠onnell said that 85-90% of creditors by value had signed up to the sukuk plan, a figure that had edged up to 91% by the end of December. Who is holding out is unclear, but the bulk of creditors are thought to be contractors.

David Yaw, Halcrow鈥檚 regional director for the Middle East, says that the remaining 4% are likely to be either smaller creditors yet to sign on the dotted line, or a single bigger creditor still putting up a fight, and unlikely to be looking for more business with Nakheel in the future. 鈥淲hen we met with senior executives at Nakheel, I didn鈥檛 get the feeling that they were holding back anything horrible,鈥� he says. With most people signed up and with limited options to go through the courts, most working in the region believe it is a question of when, not if, Nakheel issues the sukuk.

Yaw says the Nakheel top brass鈥� assurances that the bond would be issued in the first quarter of the year seemed genuine: 鈥淲e came away from the meeting thinking that what we were being told was in good faith.鈥�

British consultants, however, are relatively powerless to force Nakheel鈥檚 hand, and most signed up to the deal relatively quickly. The comparatively small size of debts to UK consultants - still about 拢250m, according to the Association for Consultancy and Engineering, out of a total of $10.5bn - and the fact that Nakheel will probably, one day, be a developer to be reckoned with once again, means that nobody canpress too hard for the money they are owed.

Trust in Nakheel is returning, but at a glacial pace. About eight projects, stalled since the crash, have been restarted in Dubai. One head of a UK engineer in the region says that confidence is returning because 鈥渃ontracts are being paid promptly鈥�.

Where the power lies

But others would not work for Nakheel again unless payment structures change. One senior UK engineer says: 鈥淲e were offered more work by Nakheel 6-7 months ago but we rejected it because they wouldn鈥檛 pay up front. It could just have been to keep us happy over the debt situation.鈥�

鈥淲e always try to minimise risk and avoid this problem as much as possible by asking for money up front and not stretching beyond our agreed credit levels,鈥� says another. Nakheel has started courting firms to work on a small but secret waterfront project, but has been rebuffed by at least one UK engineer.

The balance of power in Dubai, then, has changed, with more due diligence of clients, and consultants more willing to walk away from projects when they aren鈥檛 paid. 鈥淧eople will demobilise much quicker,鈥� says Simon Harden, chairman of Waterman International. 鈥淐lients now know it isn鈥檛 an idle threat.鈥�

Dominic James, of consultants鈥� organisation British Expertise, has seen signs of humility in how Nakheel presents itself after the crash. 鈥淭hey are more transparent, more humble, if you like. Their PR is more nuanced. They are licking their wounds, really.鈥�

Nakheel declined 好色先生TV鈥檚 request for an interview with either O鈥橠onnell or its chairman, Ali Rashid Lootah. In a statement it said: 鈥淣egotiations are currently under way with all creditors 鈥� The sukuk is expected to be issued in the first quarter of 2011.鈥�

The Nakheel saga has left UK consultants and contractors hundreds of millions of pounds out of pocket, and the end date is not set in stone. But as some engineers who were not caught out ask: shouldn鈥檛 companies have been suspicious of a developer intent on building an island complex in the shape of the universe for 200,000 people? In the boom times anything seemed credible. With austerity realism has made a return - but at one heck of a price.