Cap Cana addresses certain questions relating to the terms of its Consent Solicitation for its 9.625% Senior Secured Notes due 2013

SANTO DOMINGO, Dominican Republic, Oct. 22 /PRNewswire/ -- Cap Cana S.A. ("Cap Cana") launched a consent solicitation (the "Solicitation") on October 15, 2007 in connection with its 9.625% Notes due 2013 (the "Notes") to modify certain terms related to incurrence of indebtedness.

The Solicitation does not seek to change any of the terms of the Notes related to basic collateral protection, however it does seek to amend two defined terms in the indenture (the "Indenture") governing the Notes related to debt incurrence. As subsequent investor enquiries have suggested that some holders of Notes are confused with the impact of the consent solicitation on the terms of the existing Notes, Cap Cana is issuing this press release in an attempt to clarify for all holders of Notes certain key points of the Solicitation and terms of the Notes.

This press release does not represent any amendment to the Solicitation or the Solicitation documents. Holders of Notes are urged to study both the Solicitation Statement dated October 15, 2007 (the "Solicitation Statement") and the Offering Memorandum (the "Offering Memorandum") for the Notes dated October 27, 2006.

Below we address certain questions that investors have raised since launch of the Solicitation on October 15, 2007:

Question: What exactly does the proposed amendment consist of?

Answer: The proposed amendment consists of two parts. As background for the first part of the proposed amendment, the Indenture currently allows Cap Cana to incur additional indebtedness only if a leverage ratio requirement is met after giving pro forma effect to the incurrence of the additional indebtedness. Basically, the leverage ratio requirement is that the amount of pro forma indebtedness divided by Cap Cana's total capitalization does not exceed 50%. The current definition of pro forma indebtedness contained in the Indenture states that "any amounts on deposit" are subtracted from the total amount of indebtedness incurred or proposed to be incurred. The first part of the proposed amendment described in the Solicitation Statement clarifies that "any amounts on deposit" also includes deposit amounts maintained on future debt that is subject to restrictions substantially similar to those governing the Notes. This is simply a clarification that additional debt is permitted if it is subject to available collateral currently not pledged as collateral for the outstanding Notes and any proceeds from such collateral are subject to similar disbursement conditions, including permitting draws from the amounts in deposit in construction escrows only as construction progress is certified by an independent engineer.

The second part of the proposed amendment consists of modifying the definition of total capitalization to more accurately reflect Cap Cana's commercial position by including cash representing customer deposits that are currently on deposit and future payment commitments to the extent they reflect a conservative estimate of future net revenue. More specifically, the proposed amendment seeks to add the following items to the definition of total capitalization: (i) deferred revenue, which represents receivables from customers on the sale of land lots, net of cost, (ii) 50% of customer deposits, which represent the actual cash received from customers who purchase a residential unit but that are not yet recognized as revenue, per the accounting requirements of International Financial Reporting Standards ("IFRS"), and (iii) 50% of the amount of future customer payment commitments on residential units that have been sold but that are not yet completed. Cap Cana believes this part of the proposed amendment to be a conservative estimate of its ability to realize on these amounts for two reasons: first, customers, once they have made their initial deposits, subject to certain restrictions, are committed to make additional payments to purchase the subject property and second, there has only been only one customer out of approximately 1,060 unit sales originated by Cap Cana that has defaulted following the payment of the deposit related to the purchased property. This part of the amendment, among other things, permits Cap Cana to incur the indebtedness required to make the appropriate advances to the master development at a pace commensurate with current property sales.

Question: What is the increase in debt capacity that the proposed amendment allows?

Answer: Based on the unaudited financial statements of Cap Cana as of and for the six months ended June 30, 2007, Cap Cana estimates that it currently has the capacity to incur additional Indebtedness (on an unsecured basis) of approximately US$192 million. After giving effect to the proposed amendment, this capacity would be approximately US$505 million. This would be in addition to debt capacity for debt that is secured and with respect to which Cap Cana has established construction escrow deposits.

Question: Why are the proposed amendment and the resulting incremental debt capacity required? Were the Notes not sufficient to fund the build-out of Phase I?

Answer: The proposed amendment is required at this time primarily because Cap Cana successfully completed the milestones required for Phase I at a pace much more accelerated than originally anticipated, meeting full collateralization of Phase I 16 months ahead of expectations. The financing generated by the Notes was sufficient to repay nearly all of Cap Cana's debt outstanding at the time of the offering of the Notes, to pay amounts due to the construction contractor for advances on works related to Phase I, to set up the Debt Service Reserve Account for the benefit of the Notes, and to fully build out of Phase I. However, the accelerated transition from land development to full construction of real estate products related to Phase I has required more capital for construction more quickly than initially estimated, limiting Cap Cana's ability to complete other works in the development which are not part of Phase I -- and which will enhance the value of all property, including those related to Phase I. This need for more capital is due to a combination of the continued accelerated expansion of the project with the fact that the covenants of the indenture, which are based on International Financial Reporting Standards criteria rather than real-time demand-based needs, allow for revenue recognition in connection with land development earlier than with residential unit development due to recognition on an as completed basis. Incremental debt capacity may be required to finance the build out of other facilities and infrastructure that is incidental and important to Phase I, but these were not part of the original financing as all of the costs of Phase I (which is only a fraction of the entire master development project) were accounted for and paid by the proceeds from the Notes but were limited exclusively to the construction costs related to Phase I. Examples include road, telecommunications, and electrical distribution infrastructure needed to provide reliable services to residents in the development, or amenities such as beach club and commercial and entertainment facilities. These amenities contribute to the broader Cap Cana environment and thus are expected to enhance the value of the units and land already sold, a substantial portion of which have been pledged as collateral for the Notes.

Question: Increasing debt capacity seems to be contrary to noteholders' interests, so explain how noteholders will benefit from the proposed amendment?

Answer: In management's view, Cap Cana's ability to incur additional indebtedness, in the context of such a large overall master development, is for the benefit of all its creditors as improvements made to the entire development benefit all of Cap Cana's creditors by enhancing the overall value of their collateral, by improving the likelihood of successful sales of the overall development, and by building customer volumes at the development, all of which we believe will have a positive impact on Cap Cana's ability to generate other recurring revenues from operations. In addition, it is also relevant to current holders of Notes to bear in mind that, taking into account the amounts on deposit in various collateral accounts for the benefit of the noteholders, the value of pledged Eligible Receivables, and the appraised value of the land collateral that is currently in place for the benefit of the noteholders, at June 30, 2007, the collateral coverage for the Notes totaled approximately 420% of the aggregate principal amount of outstanding Notes. This coverage will not (and cannot) be affected in any way by any issuance of notes or incurrence of other indebtedness by Cap Cana, although clearly the value thereof can fluctuate from time to time.

Question: How does the collateral package operate to protect noteholders?

Answer: At closing, the collateral consisted primarily of undeveloped real property subject to a mortgage granted in favor of holders of Notes. At this point, the collateral coverage for land was at least 200% of the outstanding amount of the Notes, at orderly liquidation value (i.e. 70% of market value). Once land is developed and sold, Pre-Completion Receivables (which still have "construction risk") are pledged to noteholders and an independent engineer certifies that Phase I is substantially complete (which has not yet occurred), the lien on the land sold is gradually released and the collateral migrates from a lien on the land to a lien on the resulting Post-Completion Receivables (which have no "construction risk") resulting from the sales of land lots or residential units. The lien on these Post-Completion Receivables also represent a lien on the Underlying Property of such receivables.

Consequently, the lien on the real property is maintained at 200% (effectively giving the Notes coverage of 325%) until Substantial Completion, after which the lien on real property is gradually released in line with the production of Post-Completion Receivables. Although the land subject to the additional mortgage can be substituted by other land, the value of the substituted land has to be certified by an independent appraiser. At any time after Substantial Completion, if Post-Completion Receivables become ineligible (in the event, for instance, of customer defaults) Cap Cana must substitute the Post-Completion Receivables with Pre-Completion Receivables, in which case land with a 200% orderly liquidation value must also be pledged to noteholders. This feature creates additional credit protection for the Notes inasmuch as it seeks to provide a mechanism for substitution of defaulted collateral.

Question: The Indenture refers to "pari passu debt". Does this mean that with further debt incurrence, the Phase I collateral package is to be shared?

Answer: No, the Phase I collateral package is only available to holders of the Notes and will not be affected under any circumstances by further issues of notes or incurrence of additional indebtedness proposed by Cap Cana. If Cap Cana wishes to incur future senior secured indebtedness, such indebtedness would rank "pari passu" in the corporate hierarchy inasmuch as any such debt could never have priority in right of payment to the Notes but Cap Cana would have to arrange for a completely separate collateral package to secure the proposed new issue of notes or other debt. Phase I collateral is only available as collateral to the holders of the Notes.

Question: In the June 30 Quarterly Report, why have "Subject Properties" remained static at US$500 million yet "Eligible Receivables" have risen from US$66 million to US$268 million?

Answer: The data referred to "Subject Properties" has remained static at US$500 million in the June 30, 2007 financial statements because those properties can only be released only after Substantial Completion, and upon delivery of Post-Completion Receivables. Eligible Receivables increased because Cap Cana successfully sold Phase I products that have been pledged as security for the Notes but that remain subject to construction.

Question: Does this mean that Phase I collateral can be removed/substituted to the detriment of the noteholders?

Answer: Phase I collateral is specifically defined as the package of receivables that results from the application of construction escrows that (once finally constructed, i.e., "Post-Completion Receivables") will equal at least 125% of the outstanding principal amount of Notes. Until completion of Phase I, this so-called Phase I collateral is supplemented by a mortgage over additional real estate property that Cap Cana has pledged to holders of the Notes. This package of collateral is inalienably and exclusively for the benefit of holders of the Notes, though land that is subject to the mortgage can be substituted by land from other parts of the property of equal appraised value. This structure is designed to ensure that until construction is completed, the collateral protection afforded to the Notes is sufficient to ensure maximum realization of value for the Notes if a default were to occur. Release of land over time is monitored by the Trustee and is effectuated in order to ensure an orderly transition from land subject to a mortgage and Eligible Pre-Completion Receivables to eventually Post-Completion Receivables that are free from construction risk.

Question: Will you provide back up for the items that the proposed amendment would add to the definition of Total Capitalization?

Answer: Yes, we will ensure all items are available in the quarterly and annual reports to enable investors to tie them back and independently affirm the ratio calculations.

In summary, the outstanding Notes basically represent a fully collateralized construction financing facility that permits draws that are both certified by an independent engineer and ultimately collateralized with eligible receivables or cash. The first part of the proposed amendment is simply a clarification that additional debt is permitted, either on an unsecured basis or on a secured basis, subject only to the amount of available collateral that is not currently pledged as collateral for the outstanding Notes. The second part of the proposed amendment essentially permits a limited expansion of Cap Cana's general debt capacity, which continues to be subject to the same leverage ratio requirement as before (50% maximum debt to total capital).

Under the Solicitation, Cap Cana is offering a consent fee of US$12.50 in cash for each US$1,000 in principal amount of Notes to holders of the Notes who provide their consents to the proposed amendment. Cap Cana calculates that, based on the expected payment date of the consent fee, the contractual amortization schedule of the principal, and a hypothetical par carrying value, the consent fee would increase the yield of the Notes from 9.625% to approximately 10.00%. Cap Cana believes that by consenting to the proposed amendment holders of the Notes only strengthen the quality of their collateral because the proposed amendment will facilitate continued expansion of the Cap Cana master development in general, which, Cap Cana believes, is likely to enhance property values and its revenues. In addition, holders of the Notes should be aware that any subsequent secured debt that Cap Cana wishes to incur must be secured completely separate collateral distinct from the security provided to the outstanding Notes. The Notes can never be subordinated to any other outstanding or future debt of Cap Cana.

Given the scope of the property and the breadth of its product offerings, Cap Cana believes that it will be a unique development in the Caribbean and the world. CB Richard Ellis, the largest commercial real estate services firm in the world, issued a draft of an appraisal report in which they estimated that the market value of the entire Cap Cana property as of September 12, 2007 was approximately US$2.7 billion. As of June 30, 2007, Cap Cana had invested approximately US$300.0 million in infrastructure and other improvements, including construction of paved roads, water reservoirs and associated distribution systems, sewage treatment facilities, power generation and distribution for the project's energy needs through 2007. Since the commencement of the project through June 30, 2007, Cap Cana has sold approximately 1,060 units of real estate properties -- including land lots sold to developers -- for an aggregate of US$1billion.

The Solicitation will expire at 5:00 p.m., New York City time, on October 26, 2007, unless the consent solicitation is extended by Cap Cana, in its sole discretion. The terms and conditions of the Solicitation are described in the Solicitation Statement, which has been sent to all holders of record as of October 12, 2007. Requests for additional copies of the Solicitation Statement, the Letter of Consent or other related documents should be directed to Global Bondholder Services Corporation, the information agent, at (866) 873-6300 (toll-free) or (212) 430-3774. Deutsche Bank Securities Inc. and Morgan Stanley are the Solicitation Agents for the consent. Holders with questions regarding the consent are encouraged to contact Deutsche Bank Securities Inc. collect at (212) 250-2955 or at (866) 627-0391 (U.S. toll free), Attn: Liability Management Group, or Morgan Stanley at (212) 761-5797 or (800) 624-1808 (toll free), Attn: Sarah Downie.

This press release is for informational purposes only and is not a solicitation of consent with respect to any securities of the Company. The consent solicitation is only being made pursuant to the consent solicitation documents, including the Solicitation Statement that has been previously distributed to holders of the Notes. The consent solicitations are not being made to holders of Notes in any jurisdiction in which the making or acceptance thereof would not be in compliance with the securities, blue sky or other laws of such jurisdiction.

Forward-Looking Statements

This release includes "forward-looking statements" that are based on the current assumptions, expectations and projections of Cap Cana's management about future events. Although the assumptions, expectations and projections reflected in these forward-looking statements represent management's best judgment at the time of this release, Cap Cana can give no assurance that they will prove to be correct. Numerous factors, including those related to market conditions and those detailed in the Consent Solicitation Statement dated October 15, 2007, may cause results of Cap Cana to differ materially from those anticipated in these forward-looking statements. Many of the factors that will determine Cap Cana's future results are beyond the ability of Cap Cana to control or predict. These forward-looking statements are subject to risks and uncertainties and, therefore, actual results may differ materially. Cap Cana cautions you not to place undue reliance on these forward-looking statements. Cap Cana undertakes no obligation to revise or update any forward- looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.

About Cap Cana

Located on the easternmost tip of the Dominican Republic, Cap Cana is being developed as a multi-use luxury resort in the Caribbean with world-class beaches, championship golf courses, yachting facilities and other leisure amenities. The property consists of over 46 square miles (119.9 square kilometers) of land, including a five-mile (eight kilometer) coastline and 2.2 miles (3.5 kilometers) of one of the most pristine beaches in the region.