A subsidiary of Oman’s sovereign wealth fund is trying to consolidate its position as an investor in the $20bn Blue City real estate scheme in the sultanate, as the fund looks to take control of the project, which has stalled since 2009.

Onyx Investments, a subsidiary of the Oman Investment Fund, has submitted an offer to buy back about $143m of outstanding bonds issued by Blue City at a price of 35 cents on the dollar. Bond traders say recent trades in the bonds have been about 12 cents on the dollar.

If Onyx’s move is successful, and it is understood to already have indicative approval from 55 per cent of the bondholders, it would give the government investment fund control over the fate of the project. In 2011, Onyx bought out $655.5m of another tranche of the $925m bonds that were issued in 2006 to finance the scheme.

When it was originally conceived, Blue City was expected to cover 32 kilometres and become Oman’s third-largest city including schools, apartments buildings and villas. It was viewed as an integral part of the sultanate’s economic diversification.

The 2008-09 financial crisis led further investment in the project to dry up and progress has stalled since then. As a result, the scheme has been burdened with unsustainable debt levels and has been unable to move forward. Onyx’s move is not understood to be a precursor to restructuring the project and restarting work on it, but it does give the investment fund more options to do that. UK investment bank Rothschild has been advising Onyx on strategic options for the scheme.

Bondholders have until 27 November to accept the offer from Onyx, which has said it will only go ahead with the bond purchase if 75 per cent of the investors agree to the deal.

“Blue City is a really important project for Oman and if this deal goes ahead, it will open the door for the government to invest more capital and restart work,” says an investor close to the process.

The Oman Investment Fund declined to comment.