And the lucky winner is.... Plus more on Blue City

Sorry for the lack of posts this week dear Reader, I've been a busy Dragon; lots of knights to slay, maidens to ravish, treasure to hoard, you know how it is. Work work work.

First, the draw for the winner of 2 free tickets to the Muscat Rugby club fund raiser, a comedy night featuring up to a dozen comedians on Thursday May 13th and held at the Muscat rugby club near the ABA school in Al Khuwair.



The draw was held under the usual supervision of Ms Dragon and a very senior member of the Internal Security Service on Monday evening. And the winner was...

"Delirious in the Desert"

Congrats DITD! Enjoy. I've been promised a review and pics. The rest of you, there are still tickets available.


Blue City
Well connected fan Ibrahim made a great comment on the last Blue City story, and I'm reposting here, because this information is accurate and hard to find.

Dear UD,

Your blog is hugely popular. Your accurate and authentic information is sincerely appreciated. Let me add some more data on the blue city project. Hopefully those maroons who messed should wake up. Its about time His Majesty Qaboos asks Anees to shut up and get out of the project. Enough of wasta boss.

Issuer = Blue City Investment 1 Limited (Commercial Registration No. WK163178) incorporated in Cayman Islands for the purpose of issuing Class A, B, C & D Notes worth US$ 925 Million. Borrower = Blue City Company 1 SAOC (Commercial Registration No. 1/83627/7) incorporated in Oman.

On 7th November 2006 Blue City 1 SAOC signed Intercompany Loan Agreement and received US$ 921,400,960 as follows: Class A1/Class A2/Class A3/Class A4 – 658,982,625; Class B – 142,200,630; Class C – 50,217,705 and Class D – 70,000,000.

There were many PARTIES to the transaction. Namely, (1) The Bank of New York as Offshore Security Trustee (2) Bank Muscat SAOG as Onshore Security Trustee (3) Bear Stearns Bank Plc as Class A guarantor (4) The Bank of New York as Offshore Account bank (5) Bank Muscat SAOG as Onshore Account bank. Bear, Stearns International Limited were the arranger and Oppenheimer (Samuel Grossmann) as the brokers.

Clifford Chance drafted all agreements and Iain Morpeth is the man in-charge. The Intercompany Loan agreement contains a number of representations, covenants and events of default which are subject to a Material Adverse Effect qualification. Project documents specified are: Development agreement, Construction contract, construction security, construction contract guarantee, land transfer agreements, Works agreement, Balance of Work agreement, Additional Works Agreement, etc.

Government of Oman represented by its ministers (Tourism, National Economy and Commerce & Industry) have signed & ratified agreements, why are these ministries keeping silent?

If the SEC (Securities and Exchange Commission of the USA) can take on Goldman Sachs for fraud, why spare Blue City? US$ 50 Million was held in the Blue City 1 SAOC’s Bank Muscat account as escrow, where is that money?

US$ 20 Million was escrowed for the purchase of Al Sawadi Beach Resort Hotel and of the associated usufruct, where is that money?

Blocked escrowed for the company was US$ 105,417,358, where is this money?

US$ 440,588,374 was the total initial mandatory deposit that was made with the issuer (Blue City Investment 1 Limited, Cayman Island). Where is the audited financials for Blue City 1 SAOC and Blue City Investment 1 Limited???

Can somebody from Blue City 1 SAOC answer?

Here, here Ibrahim. And not even a press release in the Times of Oman explaining the total normality of the bankruptcy, global crisis, just look at Dubai, etc etc etc. How peculiar!

As for those bonds, you might be interested to know the latest market prices*, as advised by a trusted source in a GCC National Bank treasury outfit. Pricing of a $100 Blue City Bond as of the 27/4/2010 was:

Secured tranch Class(A1) $35.55
Secured tranch Class(A2) $30.50
Subordinate tranch Class (B1) $25.35
Subordinate tranch Class (C) $20.35
Subordinate tranch Class (D) $10.40

Bare in mind that the tranch A1 was priced at closure at $98.50 and reached once upon a time to the whereabouts of $120!

Wow. Way to destroy value ASIT team!

The secured A1 & A2 bonds seem to have a very small spread against the absolute D class junk, given they are supposedly fully secured on billions of dollars worth of 25km2 of Al Sawadi land. This can only reflect the way the market is currently pricing the competency and trustworthiness of the people behind Blue City, or they'd instead, IMHO, be up around 70-80 cents (just compare with unsecured Dubai Holdings bonds recently).

*This is just for information and is not a recommendation for people to act upon or invest. Muscat Confidential does not provide investment advice. Readers are strongly advised to always obtain advice from their own legal and financial advisors before making any financial commitments that would require them to pour good money after bad.

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 executes Anees' cunning plan of... bankruptcy. Or, How to blow a billion dollars

In keeping with the theme of financial fraud, Blue City is again in the news.

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
Bradley Hope
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.