Barclays Favors Selling Nakheel Bonds After 75% Surge

Investors should sell Nakheel PJSC’s bonds after they rose as much as 75 percent from record lows as parent Dubai World is likely to offer bondholders recovery values below current levels, Barclays Capital said.

Nakheel’s 3.6 billion-dirham ($980 million) floating-rate note due in May rose to 71 cents on the dollar yesterday, gaining 58 percent from the Dec. 7 low, Bloomberg data showed. Nakheel’s 2.75 percent bond due January 2011 traded at 63 cents on the dollar. Prices for the note have gained 75 percent since Dec. 9.

“The final recovery value for Nakheel is likely to be negotiated at 40 percent to 50 percent,” London-based analysts including Alia Moubayed and Milena Ianeva wrote in a report released yesterday. “We would therefore be sellers of Nakheel 2010 and 2011 paper at current levels.”