DUBAI: UAE-based investment fund Essdar Capital, which bought the senior debt of the troubled $15 billion Blue City property development in Oman, plans to focus on developing hotels and tourism in the project, an executive said. Earlier on Wednesday, Essdar said in a statement it had bought about 99 percent of Blue City's class A debt via a public tender offer for $655.5 million, in a distressed debt deal that highlights the woes of the region's property sector. "We do have a very significant control on the decision making and we do intend to exercise voting rights in a positive manner to develop the project," Suketu Sanghvi, senior managing director of structuring and investments at Essdar, told Reuters. "(Hotels and tourism) that's an element of the project that is quite positive for us ... occupancy rates are very high in Oman." "A lot needs to be done before plans can be made," he added. An hour from Oman's capital Muscat, Blue City was touted as Oman's biggest real estate project but it stalled amid dismal sales and clashes between shareholders. The 20-year project, which will be built in 12 phases, was expected to have a population of 200,000. Phase one constitutes 2.8 square kilometers and more than 3,000 villas and appartments, according to its website. Construction on phase one began in 2006. In July last year, Essdar said it made a discounted bid for two bonds used to finance the project, after the notes were downgraded. "Essdar has previously made attempts to buy Class A debt in Blue City. I think reports that Qatari investors were eyeing the project may have pushed them for a tender offer," said Andre Andrijanovs, corporate analyst at London-based distressed debt firm Exotix Limited. "The current shareholders could potentially be wiped out. They would like to restructure the project and they probably still find some value in it," he said. Blue City issued $925 million worth of bonds in November 2006 and these were divided into four categories — A, B, C and D — which are in descending order of asset security. The two bonds were downgraded in July to near-junk status, with ratings agencies warning the value of Blue City's property sales had fallen dramatically, with no sign of recovery in the short to medium term. Essdar bought the debt through its affiliate Essdar Investments Limited. Blue City Chief Executive Richard Russel declined to comment when contacted by Reuters.
