Essdar to buy bonds for tighter grip on Blue City

Investment company already has power to decide project future

Essdar Capital, the investment company that took control of the failing Blue City property development in Oman, wants to buy more of the project's bonds to consolidate its ownership. Essdar already owns 99.1 per cent of the "Class A" notes, giving it the ultimate decision-making power on the project's future.

The company is "wishing to explore the ability to further consolidate and build upon its investment and existing control rights", Essdar said. Blue City was launched as Oman's largest and most ambitious property project in 2006 but was bogged down by an ownership dispute, design changes and slow sales. The 20-year project was expected to become a city with a population of 200,000 west of Muscat. The first phase was funded by a bond and continued despite the issues until this year, when it could no longer meet its obligations.

Essdar is majority owned by Sheikh Tahnoon bin Zayed and Sheikh Hazza bin Zayed, members of the Abu Dhabi Royal Family. It made its first move on the distressed Blue City bonds in August last year when it acquired an undisclosed portion of the "Class A" bonds at a discount. Last month, Essdar acquired nearly all of the remaining bonds and publicly said it had gained "significant control over decision making on the project".

Suketu Sanghvi, the senior director of structuring and investments at Essdar, said the focus would be to finish the hotel projects to take advantage of demand for hotel rooms in Oman. Meanwhile, the project also saw a milestone recently in the judgment of Oman's supreme court in favour of one of Blue City's owners, Cyclone. Cyclone and AAJ Holding have been in a long dispute over how much each owns of the project.

The supreme court ruled that Cyclone owns 70 per cent of Blue City, Bloomberg reported, citing officials. AAJ formed a partnership with the Qatari company Bin Muhanna to help with the project. Najib al Noaimi, the chairman of Bin Muhanna, is a former justice minister of Qatar and defence attorney for the deposed Iraqi president Saddam Hussein. The two parties plan to file lawsuits at the London Court of International Arbitration and ICC International Court of Arbitration in New York, it was reported.