Wednesday, July 15, 2009

Blue City: Rating Company Fitch further downgrades

Yes, the fantastic Blue City Project has again been down-graded by Fitch Rating agency because of poor sales and the impending default on their loan covenants.

In fact, I'm reliably informed things are so bad that BCC1 couldn't even make the June salary payment for their own staff on time as the bank account was so empty. LOL.

Expect a pseudo-Government rescue soon, probably in the form of some Government controlled entity (such as one of the pension funds) buying a big bunch of their properties.

Even then its difficult to imagine them avoiding technical default. Given the outstanding payments due contractors, and the current market, even the Government won't give them the $400+ mln they need. Re-negotiations with bond holders are essential. In fact, rather than buying the properties it would probably be cheaper for the State Investment fund to buy the bonds directly for a big discount.

What a fantastic job the Chairman of the board is doing. At least he found the time to entertain Michael Jackson...

Any comment 'John'?

Oman's Blue City downgraded on default fears
Jul 15, 2009

Fitch Ratings downgraded Tuesday Oman's Blue City Investments 1 Ltd on fears of default of a loan payment.

The Blue City Company 1 had raised in 2006 $925 million real estate bond financing to fund the development of a $20 billion the Blue City project, or Al Madina Al Zarqa, in the Sultanate of Oman.

Fitch Ratings downgraded Blue City Investments' $262.5 million class A3/A4 due October 2016 to 'CCC' from 'B+', the rating agency said in an emailed statement.

Blue City's $143 million class B1/B2 due October 2016 was also downgraded to 'CCC' from 'B and the $50.5 million class C due October 2016 was downgraded to 'C' from 'B-'.

A $70 million class D due October 2016 was lowered to 'C' from 'B', it added.

"Blue City Company 1, or BCC1, has already breached each of sales tests 1 to 4 and on the 7 November 2009 interest payment date will be tested against sales test 5 for the first time," said Fitch.

"Should BCC1 fail to meet sales test 5, which measures whether some $455 million of aggregate collections will be made by that date, an immediate mandatory prepayment of the loan will be triggered.

"In this event the loan will be considered in default," it said, adding that current aggregate collections stand at approximately $77 million."


  1. UD - am i missing some arithmetic here??
    $925 mill bond was raised but add up the tranches = 262.5+143+50.5+70= 526 total
    what happened to the other $399 mill ??
    Has that evaporated on performance bonuses HHAAA HAA HAAA !!!!!!!!!

    Blue City = Bail-Out City.
    Oman's own little sub-prime real estate meltdown.
    Que - PR, Adds, positive-spin, "John the BS artist" and more deck-chair rearranging on the Titanic.

    "this sucker is going down" as GWB would say.

  2. FJ - while you are out digging in the fields, I stumbled upon this recipe in the farmhouse which may help you reconcile the rest of the pie:
    "Missing Pie" Ingredients:
    $50 to the self serving consultants of the majority shareholder,
    $150 contractor as a mobilisation fee
    $50 to the bond originator (see wobbly links to Oppenheimer/ Bear Stearns et al)
    75% security over land
    Impossible sales revenue targets (see ex sandals and sundress Estate Agent masquerading as property consultant)
    Dribble the balance in other poorly considered management fees and operational structures, add a healthy dose of Ostrich syndrome from the local shareholders, bake for two summers through a global meltdown allow market cooling under management which believes its own BS and Presto! Instant trading insolvent PropCo which has to fire sale the family silver to stay afloat!

  3. Me thinks it's now a Poo City. Sic transit gloria mundi.

  4. So, does that make the villas therein dearer or cheaper?

  5. With this post now having been up for five days and no one having raced to its defense as the best thing since sliced bread, I think one thing is clear: things are so bad at La Ville Bleue that they've either had to fire their Internet trolls or disconnect their ADSL!

  6. Give the guys a break .... the whole world is in a mess ... esp the Property business.

  7. Besides you are very unfair to them ... they are trying very hard. I think you should be appreciative of who is paying your salary ... if you are really a Consultant like you say!

  8. First project sold by blue city, Al Na’man was to be delivered March 2010. It is officially delayed to March 2011 which is last month company can extend as in sales contract. I heard it is not even going to completed by then but if the company declare everyone will take refund and walk off now. I think investors like me have to wait for March 2011. I visited site. Forget the buildings; there is no way road, electricity etc be there by that time. If someone want to move, how he will?
    It seem there is one gang which is trying to take over company. These people have links from before with each other and they have been recruited at very high salaries and they not qualified also. Omani brothers and Asians, I have been told, have been forced to leave or downgraded.
    Latest I heard company is giving all accrued end of term benefits to all employees. Is the company closing down? What happens to my investment? Shall I seek legal advice?


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