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Santo Domingo.-  A report by the company J.P. Morgan and a November 19 article in the magazine Latin Finance evaluate the resort Cap Cana’s possibilities survive the current crisis, and its collapse could cast shadow on future investments in Dominican Republic.

The deadline for Cap Cana to pay a bridge loan obtained from Deutsche Bank and Morgan Stanley a year ago expired Wednesday.

A few weeks ago Cap Cana had to dip into its reserve fund to pay the November dividend of the US$250 million issued in bonds with maturity in 2013. In doing so the company has until year end to replenish the fund, or risk default in notes.

The company’s ratings have been downgraded by Moody’s and Fitch to Ca and CCC, respectively, and may still face major devaluations, essentially to a D.

Cap Cana’s bonds are sold with a high risk “default" note and is negotiating with its creditors, including a group of five funds and a mutual fund.

People close to the process say Cap Cana initially offered to fix the debt with a high a discount, but creditors rejected, alleging that Cap Cana’s owners, the Hazoury family, have enough money from the sale of the airports management contract, to do meet their immediate debts.

There are expectations an agreement will be reached because all the parts have much win by averting default, while on the other hand, the bond holders of the US$250 million issued in 2006 are organizing themselves in anticipation of a potential bankruptcy.

The bonds are assured by a secure mortgage on lands and on the income from sales of property, whereas the bonds are traded at 20 cents per dollar, hinting at market doubts that Cap Cana can pay its obligations.

However, Cap Cana’s adviser in New York, the Weston Group, accused J.P. Morgan of trying to influence the negotiations. “JPMorgan is trying to push Cap Cana into some type of arrangement," said John Liegey, president of the Weston Financial Group.

The executive alleged that in Morgan they are using internal data obtained during its previous relations with the company. JP Morgan declined to comment.

Cap Cana’s problems aren’t just economic. It also faces lawsuits in New York courts that have sparked ill will among investors. A claim by the company Praxi and some proprietors has attracted negative press that in turn affects the company’s image.

A Cap Cana collapse would have a serious impact on the Dominican Republic, particularly in the costs of future issues and the evaluations of future operations.

The most likely solution to the resort’s crisis is a negotiation with the bond holders, whom would have to inject an undetermined sum of money so the project’s first stage can be finished, and begins to continuously produce money.

Cap Cana benefitted from record sales in 2007, though the luxurious real estate project’s debt level and cash requirements have placed it against the wall.


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16 comment(s)
Written by: gouletcolonial This user is banned, 21 Nov 2008 9:24 AM
From: Cuba, it is a secret the censors are looking for me
this will go under if the world situation continues to worsen
Written by: Jander, 21 Nov 2008 10:53 AM
From: Dominican Republic
Got this from a concerend friend yesterday..

Crisis in paradise: Meltdown leaves ghost resorts

The paralyzed work scene at the Cap Cana resort, a development including four luxury hotels, three golf courses and a mega-yacht marina, is a victim of the global financial crisis that has hit the Caribbean's tourism industry especially hard.

It's not just here, as we all know already and has been posted before.
Written by: buenoha, 21 Nov 2008 1:48 PM
From: Dominican Republic, Santo Domingo
DR gov't should give bail out to Cap Cana in order to safe investment climate
Written by: gouletcolonial This user is banned, 21 Nov 2008 1:51 PM
From: Cuba, it is a secret the censors are looking for me
not possible and not smart
Written by: gouletcolonial This user is banned, 21 Nov 2008 1:52 PM
From: Cuba, it is a secret the censors are looking for me
buying that place in this world economy is a white elephant
Written by: Ricardolito, 21 Nov 2008 2:30 PM
From: Dominican Republic, Zona Colonial
gouletcolonial , you seem to have a different location and change of view every day ..because you have been constantly saying that the DR will have a boom winter for tourists and the Cap Cana project will not be put into mothballs and will somehow be ok and now you say it will go under !! I am sure you actually know very little about the project and you are just airing a view based on a few second hand reports .
Leaving Casa de Campo aside , the major projects in the SE are Roko Ki, la Estancia; and the Metro project near San Pero de Macoris I was told by a major investor in all three that they would survive ok but th epace would be slower. This has to be the case as loans are very tight especially for second homes in unfinished deveopments . There is another project in Punta Cana and I have no knowledge of that you know Cocotal has a large ocupancy of lower quality homes and has no problems.
So the JP Morgan report is loose and non specific if indeed they said this.
Written by: Ricardolito, 21 Nov 2008 2:33 PM
From: Dominican Republic, Zona Colonial
I must repeat that the Cap Cana project is world class and as good as anything in Europe or Asia and I am very sure that there are investors waiting to snap up the various assets that may come for sale and these may include existing land owners , many of whom are billionaires
Written by: gouletcolonial This user is banned, 21 Nov 2008 2:40 PM
From: Cuba, it is a secret the censors are looking for me
Ricky no one knows this more than I .....but the same thing is happening in Dubai and the Bahamas and every where this time it is called collapse
Written by: Jander, 21 Nov 2008 2:50 PM
From: Dominican Republic
IN GC's defense and mine as well, the top minds in the world didn't see this coming.. but being pesimistic (I know it is difficult not to be) , is not what we are made of.

Just because a few deals went sour doesn't mean everyone should stop trying.

What's done is done the only reason to look back is to understand the mistakes and hope they aren't made again.

If there is a silver lining to this economic breakdown it may just be that our kids and their kids will be able to afford to live on this planet in the future. The way price of homes were going no one could afford a cardboard box..
Written by: TFISKE This user is banned, 21 Nov 2008 11:14 PM
From: Canada, Alberta
Cap cana will survive just as the big 3 auto dealers will,

I just feel it will happen don't ask me how but they will make a go of it I have been hearing rumors out of Newyork from friends close to the project

This is way to big not 2 happen somebody will get there hands on it and save it just like the big 3 a bailout will happen.

Lets see what happens many big players would love this place and may take a chance on it the plus the hard work has been done.

Written by: cheworks1959, 23 Nov 2008 9:57 AM
From: United States, New York City
GC, you are right on this one. No bailout; let the greedy Trump-wannabees sink BUT Leonel must implement some serious regulations like a) prevent artificial market valuations in real estate, and b) monitor foreign investments so they don't inflate overall prices, which limits participation from the average dominican citizen. E.g. When in Puerto Plata, some "business-type" tried to sell me a two-story house (approx. 2000 sq. feet) for 225K. I asked him why?; what would support such prices? He replied, "Foreigners". Nuff said.
Written by: gouletcolonial This user is banned, 23 Nov 2008 10:14 AM
From: Cuba, it is a secret the censors are looking for me
"Foreigners". lets go get em and skin em and dont forget " mi commission " the root of all evil creating a nation of swindlers and there hope ?
Written by: TFISKE This user is banned, 23 Nov 2008 12:54 PM
From: Canada, Alberta
Wow thats just over a 100 bucks a sq foot!

How dare he try to take advantage of you like that mmm

A house here is 300 a sq foot and I cannot see a beach from it

Goverment gets involved in to much already and reguations are not the answer

The foreigners should be removed from the DR let them take the money they invested and leave get rid of the tourists, forget any outside aid or assistants from other countries, sounds like somebody else is on something now if you believe thats the answer
Written by: WalterPolo, 24 Nov 2008 10:31 AM
From: Dominican Republic, Puerto Plata
Cap Cana’s collapse could cast shadow on Dominican investments!!!!!

Where everything else failed! Government corruption, ridiculous interest rates, abusive customs practices, homicidal labour laws, impunity at all levels, out of this world administrative harrassment, skyrocketing prices, pay-ola, swind-ola and oh, your bank just went under, with your money in it.

All of the above did not cast shadow. Thank you, Cap Cana. You're a real eye-opener.

Written by: TFISKE This user is banned, 24 Nov 2008 12:18 PM
From: Canada, Alberta
MMMM it sounds like the States at the moment
Written by: cheworks1959, 24 Nov 2008 12:42 PM
From: United States, New York City
No GC, not skin'em. Regulate the real estate market, somehow. How? I really don't know; they sorely need that foreign investment revenue. Maybe they should model themselves after societies like Japan, who maintain autonomy over their nation in the face of US intervention. Trust me, you cannot buy a piece of property in Japan without selling your first-born.
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