Nakheel Bond - Payment in Cash and A New Bond

Apparently, there is some talk in the market that Nakheel will offer a partial cash settlement and a new bond for the 14 December payment.

Since many hedge funds and other distressed debt traders bought at a discount, depending on the price Nakheel offers, this might be an attractive offer.  With the "right" amount, they could exit at a cash profit to the cost of their initial investment.  And then hope to secure a better terms/security package on the remainder.  The bond could be disposed of for another cash payment.  And a creditor buying in at a steep discount (recall Nakheel bonds were trading in the 50 cent range) could make a tidy profit in a short time.

At this point, this is just market rumor and may be nothing more than market participants talking among themselves or to themselves.  And since there appears to be little communication from the borrower, it may be the only dialogue available at the present. 

One would think that the obligor would have raised this concept earlier (before the maturity date).

There is a 14 day grace on the payment so perhaps the strategy is to have the shock of the non payment on Monday followed by a "generous" offer on Tuesday as a way of getting creditors to sign on.    Or perhaps events are moving so rapidly and so unexpectedly that the borrower is playing a bit of catch-up to the market reaction.

In any case, I think that if this is the intent, it would have been better for Nakheel to raise it earlier.  Markets don't like uncertainty.  And the more the uncertainty the less confidence creditors have in their borrowers.  Not a good thing for borrowers.  Though I suppose the consolation is that creditors are notorious for the ADD.  Delays and losses are only a temporary form of Ritalin.