Bondholders in Cap Cana Crosshairs

Capa Cana, the luxury Dominican resort development company, is seeking an exchange offer for some $250m in outstanding 9.625% 2013 notes, say people close to the company. The firm, which Monday says it succeeded in avoiding default on a $100m bridge loan by coming to terms with lenders, is apparently looking to announce an offer by Friday, according to an executive on the deal. “We want to give [holders] a better note than what they have now,” says the person, declining to provide more specifics. Buysiders and sellsiders familiar with the credit say they have not been informed of any exchange plans, and express puzzlement at what the possible benefits for the company would be for an exchange today, as the coupon is relatively low and amortizations on the bond only begin in mid 2010. To avoid tripping default covenants, Cap Cana must replenish a debt service account for the notes by January 2. The executive close to the company says it plans to do so with some $12.5m by the expected deadline. Speculation in the buyside and analyst community covering the credit suggests Cap Cana has sought to replace many of the properties backing the notes with lower quality real estate assets, a move permitted within the bond agreement. Such a move could reduce the company’s loss in the event of a default or bankruptcy farther down the line because collateral subject to seizure would be worth less. Cap Cana hired New York-based Weston Group to advise it on its debt situation.