Blue City criticism 'premature' says project chief

The CEO of Oman's mega project Al Madina A'Zarqa (The Blue City) has defended the viability of the project, saying the recent negative rating watch for the project was a misunderstanding.

Richard Russell, who replaced the project's previous managing director Fari Akhlaghi in May, said the negative ratings watch by rating agency Fitch in July should be cleared up soon.

"There's a question between the documentation of cash coming in per sale, versus the number of units sold. We're working through this right now," he told Arabian Business.

Russell said sales for the development are ahead of projections, and he expected London-based Fitch would re-evaluate their rating watch warning regarding the investment notes which form part of the $925 million financing package for the development.

"I think it (the warning) was definitely premature. We're working to bring the documents into coherence. A bond finance issue is fairly complicated, fairly rigid."

The ambitious Blue City development, which is estimated at $15-20 billion, will see the creation of a city covering 34 square kilometres of coastal land.

The project was launched in 2006, with an expected deadline of 2026. On completion of the project's 12 phases, the city is expected to host 250,000 residents.

The first phase is due to be completed in December 2012, despite a delay sparked by a major overhaul of the project's master plan.

Russell said an on-going legal dispute between the development's parent company Ocean Developments has also affected consumer confidence unnecessarily.

Bahrain-based AAJ Holdings, which owns 70 percent of Ocean Developments, and Omani partner Cyclone with 30 percent are currently disputing the ownership of the company.

"That's taking place up at the shareholder level and doesn't really affect what we're doing," he added.

"The next court case is coming up in October. But I don't get involved there - it's not really my remit. It doesn't affect the viability of the project. To simplify it, it (legal dispute) is more about how the profits will be distributed at the end of the day. It doesn't affect sales or construction."

The organisation behind the project is Al Sawadi Investment & Tourism Company, which has the backing of the Omani government.