Case Studies

The Blue City project (Al Madina A Zarqa), was contemplated as the Sultanate of Oman’s largest and most important mega city project with a size of US$ 20 bln and over 200,000 residential units near capital city of Muscat spread over 32 square kilometers. The initial funding for the project was raised predominantly through issuance of international bonds in the year 2006 with a complex security mechanism and senior bonds were rated investment grade primarily on account of cash reserves set aside for debt servicing and security over the land proposed to be developed. Tight security mechanism, lack of operational freedom and huge negative carry on cash reserves structured for the bond issuance coupled with disputes between project sponsors and the global financial crisis took the project into significant distress requiring a restructuring of the project.

The team at Essdar acted as financial advisers for the first third party tender offer to purchase debt of Blue City. The debt was listed on a stock exchange in Europe and was held by international and regional institutional investors. The debt was successfully purchased through listed tender offers and was subsequently restructured in one of the largest and most complex cross border restructurings in Middle East. It is one of the rarest and possibly the only successfully completed middle east corporate restructuring where creditors took principal ‘hair-cuts’ on the debt. Most other distressed transactions in the Middle East have resulted in re-financing of debt or bail-outs on account of failure to comprehensively restructure the debt.

Middle East restructurings for cross border debt issuances are complex on account of multi jurisdictional legal regimes: issuing vehicles located in tax friendly offshore jurisdictions, securities listings in European jurisdictions, offshore and on shore trustees and borrowing entities in local Middle East jurisdiction. The methodology of restructurings differ in each jurisdiction and recognition of foreign court judgments may not be acceptable in Middle East jurisdictions. Matters are further complicated by the fact that the clearing systems, Euroclear and Clearstream, which is most often used by Middle corporate issuers, will protect the privacy of their investor clients and will not disclose custodians’ identity to third parties making it difficult to identify the creditors. The clearing systems may also not permit tender offers to purchase debt of an issuer by a third party. Essdar Capital Limited successfully received exceptional approvals from Euroclear and Clearstream to complete the third party tender offers through these clearing systems.

The team at Essdar acted as financial advisers to the Central Bank of the United Arab Emirates and the Ministry of Finance and Industry, Federal Government of the United Arab Emirates for the merger of financial institutions in the United Arab Emirates. The transaction also involved financial assistance provided by the Federal Government of the United Arab Emirates directly as well as through the Central Bank of the United Arab Emirates to certain entities post financial crisis in the United Arab Emirates.

Numerous entities in the United Arab Emirates were affected post global financial crisis. Some in public domain such as Dubai World which went through around US$50 bln of restructuring and numerous smaller entities which were closely restructured. The team at Essdar had in their previous engagements been involved in multiple transactions with these entities including the Government of Dubai as well, which experience assisted in providing expert advice to the Federal Government of the United Arab Emirates. Having given cautionary advice prior to the crisis, being well versed with the situation and trusted as being completely independent resulted in quick resolution of the crisis.

This was an exceptional and unprecedented transaction in the United Arab Emirates. The team at Essdar successfully assisted the Government in this period of crisis and found out-of-the box solutions to control the crisis. On account of sensitive information involved, additional disclosures on the transaction cannot be provided.

The team at Essdar were appointed as financial advisers by Alcan Middle East DMCC (Rio Tinto group) for assisting them on proposed US$ 10 bln joint venture with Ma’aden, Saudi Arabia.

The joint venture involved setting up of a green field alumina plant in Saudi Arabia and certain concessions from the Government for commercial viability of the project subject to certain social commitments sought by the Government of the Saudi Arabia. Key issues such as country risks were an impediment on account of long term nature of the plant in Saudi Arabia and would impact risk adjusted returns from investment in such a project.

The team also assisted in bespoke solutions to the satisfaction of Alcan Middle East DMCC.

The team at Essdar were appointed by the Ministry of Finance, Federal Government of the United Arab Emirates to assist on sovereign credit rating exercise. The process was the first step towards setting up of a Debt Management Office, passing of relevant debt management laws and expected future issuance of sovereign bonds.

On behalf of the Ministry of Finance, the team at Essdar held multiple discussions with international credit rating agencies, large international banks and debt management offices globally to assist in this unprecedented exercise. On account of client confidentiality restrictions, additional information could not be shared.