Blue City Update - The Bahraini's are back. AAJH just won't go away...

OK. About time for another serious post.

Before that, a Dragon pat on the head for the Omani press lately - Muscat Daily, Times of Oman & stalwart print-teenager Y Magazine all doing much better lately with publishing more real stories. Mainly focused on social issues, fair enough, but it's a start. Keep it up. And the 123 Orion gig tonight is SOLD OUT. I'll publish a report of how it went after the weekend. Wish I could have attended myself, but must instead complete a quick trip to Europe now the ash is clearing. (Those Swiss elves need feeding...)

So, what of Blue City?

Well, the contractors have been kicked out. Saleh Miri, the CEO, has 'resigned' and leaves at the end of July. The team recently found a couple of hundred million dollars under the sofa left over from the bonds and are using it to pay themselves off as they all look for work elsewhere.

The recent press announcement from AAJH, the Bahraini company who originated Blue City, was a bolt from the blue, as it were. Anees and his partner used their contacts to ensure it wasn't reported in any of the Omani papers, but Ahmed Janahi (the AAJ of AAJH) had a press conference last week about how they are heading back to Al Sawadi to rescue the project, cavalry style, armed with their original 70% shareholding, a boat-load of Qatari cash, and a seriously high powered politico-lawyer: former Qatari Justice minister Dr. Najeeb.

Dr Najeeb is no pussy folks. He's the guy Saddam Hussein chose to be his lawyer. He is more than aware that the Oman court decisions against AAJH are totally flawed. Local company, and originally 30% partners in Blue City, Cyclone LLC, locked out AAJH once they had obtained the $900 million in bond money.

Photo: Here come the Cavalry. Last week AAJH announce their intention to rescue Blue City...



The 50/50 shareholders of Cyclone are, of course, HRH Sayed Haitham Bin Tariq Al-Said and (no surprise here) one Mr. Anees Issa Mohamed Al-Zedjali, Chairman of ASIT (the holding company)& BCC1 (the phase 1 development company), erstwhile newspaper editor (The Times of Oman is owned and run by his Dad, Sh. Essa Al Zedjali) and blond marketing-talent spotter par excellence...


The Oman Supreme court are still to rule (due next month) on the Omani Court of Appeal's dubious decision reconfirming that AAJH did own 70% of the original Blue City company, but that a technicality meant they couldn't own it and they should be paid off at cost by Cyclone for the shares they didn't actually own to start with. Or something. (It's hard to parse their completely logically inconsistent court ruling. Sorry).

But now that AAJH have the good Dr. Najeeb on board, the Omani courts are in deep shit, IMHO. It's like riding into the tumbleweed strewn town with the legal equivalent of Clint Eastwood covering your back.

The hope is that Cyclone's super-wasta'd up 50% owner, HRH Sayed Haitham (the Sultan's nephew cousin (thx) and and Minister of Culture - that's where the essentially almost free land came from, his far too indulgent Uncle cousin), will realise that 30% of something good, along with a restored project due to the Qatari investors, is a hell of a lot better than 100% of a bankrupt $1 Billion international embarrassment. Whether he's smart enough to realise why the project went tits-up to start with, and has the balls to cut loose his incompetent business partner, is a more interesting question.

So, AAJH is back, and he's making a pretty strong play. It's going to be interesting to see how it ends up.

Also of interest is what the fate will be of the secret 'extra' 7km2 of primo beach front Blue City property that was part of the original almost gift from HM to the first Blue City Holding Company OASIS, but was NOT required to secure the mortgage on the class A bonds and is not part of the original Blue City Master Plan. The officially independently certified land valuation used to underpin the bonds when they were issued, secured on the remaining 25km2 of land for Blue City phases 1, 2, 3, 4 ++, was.... $3.5 Billion.

Hmmm. Even allowing a 50% discount post-real estate crash, not uplifting for the more valuable back front location, and allowing another 50% wastage for roads, utilities and lakes, that's still a sweet $250 million worth of real estate.

No wonder Anees wasn't too worried that his bond holders lost their shirts and the project was driven (with him at the wheel) into bankruptcy. He was still looking at half of that, no matter what, as long as the judges did what they were told.

I also wonder if HRH ever tells his Uncle how things are going with that land he was essentially given to create a new city for 250,000 people...

MANAMA: Qatari investment company Bin Muhanna Holding Group yesterday announced its participation as a main partner in the major Blue City project being set up in Oman by the UDM Group and Bahrain-based A A J Holding.

Bin Muhanna Holding chairman Dr. Najeeb bin Mohammed Al Noaimi said the firm were happy at becoming part of the major project. "We will now approach international banks, investors and insurance companies in order to restore confidence in this project, which has been facing obstacles and hindrances, and realise its objectives.

"We will also co-operate with all the partners, particularly A A J Holding, which started the project in 2004."

He said the company will work closely with all investment and financial centres to revive the project and realise its development objectives.

He said the project has faced major setbacks and obstacles, which were created by some investors, and this has reflected adversely on its reputation.

"We will now rise to the occasion of this partnership, and we will provide financial and legal assistance through our long experience in this field to develop the project and reach positive results."

A A J Holding president Ahmed Abu Baker Janahi said the company is proud of this partnership which comes at a time when the project needs investors who have financial and legal leverage. "This initiative will be a qualitative step and a much needed addition to the project that will enable it to overcome the obstacles and hindrances which have obstructed its development and affected its reputation on a global level," he said.

"We will also invite every sincere person or party wishing to develop the project and we hope that all other investors will serve the project's high interests and the interests of all local, regional and global partners who are keen for the success of the project, particularly when its failure will affect the investment climate in the entire region," he added.

Blue City battle royale - Round 2 goes to AAJ

Muscati and Sue Hutton have posted that Cyclone's main court case against AAJH was dismissed on Monday. See Muscatis blog comments
This is really good news for Oman (and AAJH obviously), as it emphasises the independence of Omans courts, as you don't get too much more well connected as the shareholders in Cyclone LLC!

There's a lot more to come. Over the past 3 months whilst Cyclone has had the cheque book, I'm sure there has been lots of action on that account. There are already reports (Muscati again) that AAJ is counter-suing to try and get something back.

Watch this space. Round 2 may have gone his way, but Cyclone are unlikely to keep still. There's too much at stake.

Unfortunately, what the project now needs is stability and some actual construction, so they can pre-sell phase 1 and get some money back into the project. Otherwise there's a risk that the mess will make it hard to sell, and then the whole game is over as the bondholders move in...

Blue City Soap Opera breaks into the open

So, as promised yesterday, more on the soap opera that is Blue City, aka Al Madina A'Zarqa. Today Ahmed Abubaker Janahi, the Bahraini Businessman previously involved with the Blue City Project through AAJH Holdings held a press conference objecting to the fact he is now being sued in Oman.

It seems he wasn’t going off as quietly into the night as Cyclone had hoped! Holding a news conference today in Bahrain Gulf News story Mr Janahi is not a happy camper. (I blogged about him being effectively kicked out by Cyclone in December last year here.)

My sources now tell me the project may be in deep trouble, with not too much of the original $900 million left, following the need for expensive redesign of almost everything. As a result, they said the current General manager Mr Satish has been asked to go elsewhere, with an expected exit date of end March. The Chief Operating Officer, Mr Miri may not be far behind him either.
Recent speculators buying up land around Blue City may want to reconsider their somewhat precipitous investment… Looks like this story is going to run and run. I wonder who’s currently holding the bonds that effectively mortgaged the land around Al Sawadi? Is AAJH Holdings being set up to take the fall?

And I wonder if this will be reported in the Omani press, seeing as a significant shareholder in Cyclone is an 'HH' and is in the Government?

A BAHRAINI company is facing court action in Oman after its partners accused it of illegally acquiring a majority stake in a multi-billion dollar project to build an entirely new city.

However, AAJ Holdings Company (AAJHC) claims it is an unlawful attempt to force it out of the $15 to $20 billion Blue City development and is now appealing to the Omani government to intervene.

The firm owns 70 per cent of the shares in Ocean Developments, the holding company behind the project. But legal action is now being taken against it by its partner Cyclone LLC, AAJHC chairman and chief executive officer Ahmed Abubaker Janahi revealed yesterday.

He said a suit had been filed against his company in the Omani courts and claimed an injunction order had been granted, which stopped AAJHC from exercising its rights associated with shares it owns in Ocean Developments until a judgement is handed down by the court."

He said this meant Cyclone had been managing the project without any involvement by AAJHC, claiming the Omani partners had initially demanded 20pc of the Bahraini company's shares.

"An immediate intervention by the Omani government is now crucial, seeing as the minority shareholder is currently in full control of the project and has actively and independently started sales, disbursements and generating revenues - the whereabouts of which still remain unknown to AAJHC," Mr Janahi told a Press conference at the Mšvenpick Hotel yesterday.

"We have been wrongly and completely shut out with all references and our logo unduly removed from the project."

Blue City – The real story: Bahrain Businessman Ahmed Janahi Forced Out

You'll have seen the ads around for the Blue City, now of late called Al Medina Al Zarqa, a mega-development in Al Sawadi with the usual hotels, freehold apartments, golf course, marina, etc etc. Read on for the latest story surrounding this project.

Muscati recently noted Muscati's blog the very unusual letter to stakeholders that was sent on Sept 17th to investors and 'stakeholders' by Anees Issa Al-Zadjali, the CEO of Blue City Company 1 SAOC, about reports of the legal battle between AAJ Holding, the Bahrain-based originators of the scheme, and Cyclone LLC, a private company who had 30% of the action and part-owners with AAJH of the various Blue City development companies.

Cyclone is asking for a right to acquire the shares in Ocean currently owned AAJH arising from the circumstances in which the ASIT were originally acquired by AAJH. Shares in ASIT were subsequently exchanged by Cyclone and AAJH for their current holding of shares in Ocean. If the claim is successful, Cyclone will emerge as the sole shareholder in Ocean. Cyclone is an Omani company wholly owned by Omani shareholders.

It seems Cyclone was suing AAJ for all the shares, claiming AAJ were insolvent. A similar claim was made in a related US lawsuit too. Of course, claims of insolvency are a common tool of the legal process and don't necessarily mean anything real.

Dragons informants tell a different story... which may be true, or totally not true. But they are highly placed, so judge for yourself.

AAJ and their flamboyant CEO, Bahraini businessman Ahmed Janahi, were instrumental in putting the original development deal and vision together. (See a nice set of links and info on AAJ Holdings from the wonderful Sue Hutton and her non-Oman based NewsBriefsOman) AAJH organized the slightly shady financing deal that successfully raised close to US$1 Billion in capital to underwrite the $2 Billion++ Phase 1 development. You can also see in the previous link more on the strange financial group Oppenheimer Investments AG, and their no-relation-what-so-ever to the famous South African Oppenheimers, which was the basis for that other law suit in New York this year.

However, it seems that once the project was funded and clearly able to fly, the Omani shareholders in Cyclone weren't too happy giving 70% of the hopefully substantial profits to Mr Janahi.

So, my sources tell me AAJH was basically told to 'get out of Dodge' by Cyclone. They gave him a choice: 1/ To sell all his shares to Cyclone in return for just his original investment expenses, or 2/ They would use their significant connections to make sure he got nothing at all, ever. Mr Janahi is no fool, and apparently gave in to the request by choosing Option 1.

The AAJH website and the Blue City website still list Blue City as a project AAJH are involved with.

But AAJH in Bahrain told me somewhat mysteriously over the phone that (quote) 'err, no, they are no longer involved with the Blue City project in Oman'. (unquote) Which is fully consistent with my source's side of the story.

Of course, maybe it wasn't the money at all, but that Cyclone just didn't want to be associated with someone who is involved with Michael Jackson... Gulf News. It seems AAJ is quite friendly with Michael and thought he could help provide the entertainment he thinks is key to such a project. Hmmm.

The shareholders in Cyclone are apparently a member of the Omani royal family and a local business personality: see story in AMEinfo. Presumably Cyclone were able to supply the land as their part of the deal, along with a commitment from the Government to provide the significant infrastructure development essential to such a mega-project [roads, power, water, legal framework, rights for the waterfront developments].

So, Cyclone's shareholders end up with the whole deal, a checkbook with about $1 billion dollars (less the not insignificant fees of about $42million apparently paid to the financiers and all those associated with the bond deal) and can also now totally control the cashflow and all other aspects of the development. Sweet move.
Update: The member of the Royal Family (reported in AMEinfo) who owns a big part of Cyclone (and hence Blue City) is apparently HH Sayyid Haitham bin Tariq Al Said, also the current Omani Minister of Heritage and Culture. The 'prominent businessman' is as yet unidentified...

It would seem clear that the move against AAJH had the support of the highest levels of Government. I'll keep trying to get more comment from AAJH and more detail on the shareholders in Cyclone.

Background
Note the company structure for Blue is quite complicated as is not uncommon with such mega-projects.

There are the original private investment companies, AAJ Holdings and Cyclone LLC. They owned 70% and 30% respectively in Ocean Developments SAOC, who in turn own Al Sawadi Investment & Tourism Co. LLC (ASIT), Blue City Company 1 SAOC, Blue City Phase 1 Land Company Limited, and Blue City Future Phases Investment Company Limited.

AAJ Holdings Corporation (AAJ Group) AAJH was founded by Ahmed Abubaker Janahi in the British Virgin Islands as a limited liability company known as AAJ Holdings Limited (AAJHL).

AAJHL exclusively owns a Bahrain based group of companies known as AAJ Holdings Company (AAJHC), a closed shareholding company. AAJHC represents and withholds AAJ Group's interests, which are predominantly real estate focused professional companies as well as equity stakes in real estate developments.

Cyclone LLC was also involved in some fish farming and fish processing projects in Oman. As a private company with few shareholders it is very hard to get any details. Anyone who has some info on Cyclone can email the undercover.dragon@gmail.com in complete confidence.

Ocean Developments SAOG, owns Blue City Investments 1 Limited (BCI1) - the actual 'Issuer' of the bonds. The bonds are secured against the project cash flow and the land for not just phase one but other phases as well. (Exactly how that land can be used as security given Oman's strange laws on property ownership I haven't been able to find out.)

The Blue City Company 1 S.A.O.C. (BCC1) is the 'Developer' of Phase 1 of the Blue City Project by virtue of the 'Works Agreement' with the owners, and the 'Borrower' of funds (from the proceeds of the Bonds) to implement the project under an Inter-company Loan Agreement from BCI1, and it acts as the 'Employer' to the Design & Build Contractor for the implementation of the entire scope of Phase 1.

The Blue City, known in Arabic as Al Madina Al Zarqa, is a tourism and residential development being built in the Sultanate of Oman. The eventual US$ 15-20 billion project (if it gets that far!) will cover a triangular area of 35 square kilometers (14 square miles) along the Al-Sawadi coastal region. It will be a 30-minute drive from Seeb International Airport, 100 kilometers (60 miles) from Muscat and 10 kilometers from the closest town of Barka. The first phase is being built at a cost of about $2 billion. Also note that the take-over by Cyclone should not have any detrimental impact on the viability, schedule or funding of the project.