“Landmark” Middle East distressed debt deal to complete

Essdar Capital, an Abu Dhabi-backed fund based in Dubai, has taken control of an Oman real estate scheme in a deal dubbed by the Financial Times as a “landmark regional distressed real estate deal”

A real estate investment fund, backed by “leading members” of Abu Dhabi’s ruling family, has reportedly bought the senior debt of a stalled Oman leisure and residential scheme called Blue City.

According to the Financial Times, the investment by Essdar Capital, which is based in the Dubai International Financial Centre, was a “landmark regional distressed real estate deal” on account of such deals being largely absent in the Middle East despite the well documented distress in the region.

Citing sources close to the matter, the newspaper reported that Essdar had bought 99 percent of the class A debt of Blue City, giving it control over the development’s future, in a deal worth $655.5 million. The sources said the deal was completed at approximately 63 cents on the dollar.

Blue City, an hour from Oman capital Muscat, was launched in 2005 and was part of the Oman government’s vision for economic transformation, according to a further report by Bloomberg. It was expected to house more than 200 villas, 5,000 apartments, four hotels, two golf courses and a club house – it was expected to be a community for more than 200,000 people, Bloomberg said.

But failed sales targets have led to it facing financial difficulties and in February, solvency concerns surrounding Al Suwaidi Investments and Tourism the schemes’ developer, led to bonds raised against the project being downgraded by Moody’s to a Caa3 rating.