Stop Notice by The Bank of New York Mellon regarding shares in Blue City Phase One Investment Company Limited owned by Al Sawadi Investment & Tourism Company LLC, filed at the Grand Court of the Cayman Islands.

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On June 12, 2010 the following story appeared in The National (http://www.thenational.ae/business/property/blue-city-rescue-seen-as-boost-for-oman)

Blue City rescue seen as boost for Oman

By Bradley Hope

An Abu Dhabi investment company’s acquisition of the senior debt of the largest property development in Oman is likely to boost the country’s property economy, analysts say. Blue City was envisioned as a US$20 billion (Dh73.46bn) tourism centre about an hour from Muscat on the Indian Ocean. The project slowed when the financial crisis hit in 2008 and is now effectively controlled by Essdar Capital, a company backed by two members of the Abu Dhabi Royal Family.

“Now that there is a new company in control, it will allow for a lot quicker decision making about moving the project forward,” said Ian Gladwin, the Oman-based regional director of the property consultancy Cluttons. “It’s vitally important that the project is seen to progress. It can only be good for the real estate market of Oman.” Blue City was part of Oman’s attempts to diversify the economy to include a greater amount of tourism as its petroleum resources declined. The first phase of construction, overseen by Blue City Company 1 (BCC1) – an entity dedicated solely to delivering phase one of the 20-year project – was funded in part with $925 million of bonds issued in 2006.

But the project has hit obstacles from the beginning. A protracted dispute between its owners and slow sales caused the project to miss sales targets required by the bond terms. Al Sawadi Investment and Tourism Company, which is co-owned by the disputing parties, announced in January that it would hold a meeting with bond holders to vote on dissolving the company because it had spent its capital and had no “reasonable expectation to meet their debt payment obligations when due”.

But the project took a new turn last week when Essdar Capital announced it had acquired a total of 99 per cent of the A1 senior secured loans due in 2013 and A3 senior secured loans due in 2016, at a discount of 63.03 and 62.48 US cents, respectively, on the dollar. The class A notes are secured by 2,500 hectares of land and about $450m of cash held in an escrow account. Suketu Sanghvi, the senior managing director of structuring and investments at Essdar, said the investment gave his company “significant control over decision making on the project”. The focus would be on getting the hotels up and running to take advantage of Oman’s under-supplied tourism sector, he said, declining to comment on whether the company would inject new funds into the project.

Essdar is majority-owned by Sheikh Tahnoon bin Zayed and Sheikh Hazza bin Zayed. Richard Russell, the chief executive of BCC1, declined to comment. The revival of the project was also a sign that it is possible to have successful buyouts of distressed projects in the region, said Khalid Howladar, a vice president at Moody’s Investors Service, which downgraded Blue City’s A1 bonds to “Caa3” in March. That rating implies the bonds are of “poor standing and are subject to very high credit risk”.

“It definitely shows a step in maturity for the capital markets when you’ve got private investors getting involved in distressed situations and making projects viable again,” Mr Howladar said. “It has major consequences for the region as a whole in that it could signify that investors are willing to enter the real estate market now … It sets a positive precedent.”

Read more: http://www.thenational.ae/business/property/blue-city-rescue-seen-as-boost-for-oman#ixzz2Ef5v0eHg

In 2006 Business Wire sent out this press release:

Al Sawadi Investment & Tourism Company LLC Completes Phase One Financing for The Blue City, Oman

AL SAWADI, Oman — Al Sawadi Investment & Tourism Company LLC (ASIT) announces the completion of the phase one tranche of its financing for Al Madina Al Zarqa – The Blue City, Oman – one of the largest urban development projects in the Gulf.

$925m was raised from international investors. The funds will be used to finance the first phase of construction of the 34 sq km coastal development which will start in November 2006. Oppenheimer Investments is the financial adviser to the Al Sawadi Investment & Tourism Company and appointed Bear Stearns as lead arranger.

Saleh H. A. Miri, CEO of the Al Sawadi Investment & Tourism Company said, “We have taken the first major step in the financing of this magnificent metropolis by the sea. Using an innovative variety of financing techniques, including whole business securitisation, traditional secured real estate lending, project finance and credit enhancement, we have reached investors across the world who see that Al Madina Al Zarqa – The Blue City – is a vision made real.

“Working with our financial advisers Oppenheimer Investments and the arranger, Bear Stearns, we see this as a benchmark example of international investment and interest in the Middle East.”

The Blue City is centred at Al Sawadi on the Omani coast some 90 kilometres northwest of the capital Muscat. It is expected to take approximately 20 years and about $20 billion to complete over several phases.

In every respect, the Blue City will have the scenic beauty of an international resort coupled with the dynamism of one of world’s truly great cities. This splendid new jewel in the Omani crown promises to deliver one of the most unique and sought after living environments in the gulf; and indeed the world.

Its future as a magnet for tourism and all round business investment will go hand in hand with an enduring appeal to its cross section of local and international residents. The impact of the Blue City in the development of Oman’s economy as well as the creation of much needed employment will certainly be one of the most important aspects of this visionary project.

The Blue City is designed to attract over two million tourists a year to its facilities and its upscale hotel accommodation, just 30 minutes by road from the country’s international airport.

“We are extremely honoured to be involved in this spectacular project,” added Samuel Grossmann, Global Chief Executive of the Oppenheimer Group of Companies. “This bond issue is a major step in bringing the vision of Blue City to a reality. We look forward to continuing the work with the Al Sawadi Investment & Tourism Company towards the completion of this project.”