In UAE newspaper The National today is a nice article on the on-going slow motion financial train wreck that is Blue City.
Black cloud hangs over the future of Oman's Blue City
Last Updated: March 12. 2010 1:38AM UAE / March 11. 2010 9:38PM GMT
Blue City, Oman’s largest property development, could be forced into liquidation under plans being considered by the company’s board of directors, The National can reveal.
The board of Al Sawadi Investment and Tourism Company (ASIT), the parent company of the project, last month sent out a notice calling for investors to vote on the “dissolution of the company and filing subsidiaries”. The meeting has since been postponed to Monday.
“The company has lost all of its capital and have no reasonable expectation to meet their debt payment obligations when due,” the letter said. It was signed by Anees Issa al Zadjali, the chairman of ASIT.
Richard Russell, the managing director and chief executive of Blue City’s first phase, said in a statement the meeting had been postponed to allow a restructuring proposal to be made by some bondholders.
“Blue City is pleased to comment that the board meeting has been postponed for a short period to March 15, 2010, since certain Class A note holders have requested time to present a restructuring proposal for consideration by the Blue City shareholders,” Mr Russell said.
“Unlike most projects in the Middle East, our homebuyers in Blue City are secured by mortgage over the project assets of Blue City.”
Photo: Annes Al Zedjali, Chairman of a bankrupt company who started out with 32km2 of prime ocean-front real estate and almost a billion dollars in cash.
This has been predicted by Muscat Confidential for some time, with the latest post in January here for example. I continue to expect the scheme will be 'restructured' by the mortgage-backed bond holders, enabling them to get all the land and the works completed to date. GCC money is already coming in to the project. This has been the plan for some time.
Property developing ace and part-time paper boy Chairman Anees Al Zedjali has clearly figured that he's ridden this pony as far as he can, especially now that Bank of NY Mellon have firmly closed the taps. More legal disputes will now be on the way as the tussle between the various bond holders, credit default insurers, escrow account trustee Bank of NY Mellon, shareholders, contractors, sub-contractors and holding companies gets going. The lawyers will pick the bones clean.
Meanwhile, the executives of Blue City and its failed Chairman continue to sit on their fat bank accounts. Remember the project borrowed over $900 million dollars, and has continually pumped itself up on a steam of self agrandising hallucinations. If I was Bank Mellon, the bond insurer or a less secured bond holder I'd be making inquiries as to whether civil or indeed criminal charges should be instigated. There may be no holidays in Florida for Anees for a while...
While publicly the blame will no doubt be laid on the global credit crunch, project delays and AAJH etc etc, probably aided and abetted by support from the pages of Times of Oman, the gross financial mismanagement will presumably be ignored.
Eventually a scaled down phase 1 will be completed, with the hotel, marina, golf course and a load of villas, owned mainly by Kuwaitis, Qataris, Saudis and Iranians. While every businessman in Oman who wants to raise foreign capital, even for a project that's real, will see significantly higher interest payments and a lot less interested lenders. Contractors will factor in higher default risk and counterparty premium. This will damage the entire Oman economy, to an extent. But Anees will be OK.
So that's alright then.