Fitch to Rate Cap Cana's $500MM Sr Secured Notes 'B-'; Affirms $250MM Sr Secured at 'B'
Fitch Ratings has affirmed the 'B' Rating on Cap Cana, S.A.'s $250 million senior secured notes. In addition, Fitch has assigned a preliminary rating of 'B-' to the expected issuance of $500 million in additional senior secured notes. Fitch's affirmation on the existing $250 million notes contemplates a change to the terms of certain covenants in the indenture relating to the incurrence of additional debt.
also reflects the expected increase in Cap Cana's leverage after the proposed $500 million issuance of additional senior secured notes. Cap Cana's principal activity is the development, construction, operation and administration of a tourist and leisure resort community project in the Dominican Republic. When fully developed, the project will be anchored by six championship golf courses (of which three are Jack Nicklaus Signature courses), the largest inland marina in the Caribbean, several luxury hotels, more than 10,000 housing units, and numerous sports facilities, along with high-end stores, restaurants, spas, and entertainment complexes.
To date, Cap Cana has experienced tremendous success in terms of sales of real estate properties and construction within the project. Accumulated investment in the project is now over $340 million and total sales revenue amounts to over $1 billion.
Cap Cana's first golf course, Punta Espada, commenced operations this past year and is scheduled to host a PGA Champions Tour Event in 2008. Cap Cana has also signed a licensing agreement with Trump Marks Real Estate LLC to brand sales of certain real estate properties. Trump-branded sales of Farallon cliff-side lots proceeded to total approximately $289 million in one day. Additionally, Cap Cana has signed a licensing and management agreement with the Ritz-Carlton Hotel Company for the management of a hotel expected to begin construction in 2008 and begin operating in 2010. Recently, Cap Cana has hired Parsons International, one of the largest management, construction, and engineering companies in the world as Project Manager.
A material security package backs the notes in the event of a corporate default. Both the $250 million issuance and the proposed $500 million issuance will be secured by a first-priority mortgage over unencumbered real estate property, as well as receivables related to the sale of individual property units. The specific real estate that will give rise to receivables is clearly defined and completely separated between the two issuances:
--First-mortgage liens on land equal to a minimum of 200% of the outstanding debt secures the $250 million issuance. The proposed new issuance will be backed 150% by first-mortgage liens.
--Receivables arising from the sale of real estate properties will equal 125% of the outstanding debt from the $250 million issuance. The notes expected to be issued will be backed by 120% in receivables.
Currently, the $250 million issuance is fully collateralized with approximately $350 million in eligible receivables under Trustee control. Phase I products that could give rise to eligible receivables to collateralize the $250 million issuance are nearly fully sold out. Delivery on many of these units will begin in early 2008, with this issuance expected to be fully collateralized by post-construction receivables by the end of 2008.
Phase II products, which will give rise to eligible receivables backing the proposed issuance, include: sales at the Trump Condo Hotel, condominium units at Las Iguanas, which will be adjacent to a new Jack Nicklaus Signature course of the same name, and certain residences within the Green Village development that were not part of Phase I.
The structure backing these issuances adds significant investor protections in two forms:
--Cash flow controls that will reduce project execution risks.
--Bond proceeds sized to the remaining construction costs will be held in escrow and only released upon the achievement of construction milestones. Additionally, a 6-month debt service reserve will be fully funded from proceeds.
Major risks considered in the ratings of the two issuances by Cap Cana remain two-fold. First, sales of Future units must be realized in order to collateralize the transaction and generate additional working capital and general liquidity for the project. Second, construction on individual units must be completed. Fitch believes these risks to be consistent with the expected 'B-' rating on the new issuance and the current 'B' rating on the outstanding notes. The ratings differential is explained by significantly different sales and construction risk profiles between the issuances and a loosening of the collateralization requirements for the new issuance. Independent engineer reports were used to facilitate modeling assumptions, which incorporated downside analysis regarding real estate valuations as well as construction costs.
Fitch currently has a 'B' Long Term Issuer Default Rating (IDR) for the Dominican Republic with a Positive Outlook.
For more detailed information on Cap Cana, see the new issue report titled 'Cap Cana S.A.' dated Nov. 3, 2006, available on the Fitch web site at Fitch Ratings.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, Fitch Ratings. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Fitch Ratings
Sam Fox, 312-606-2307 (Chicago)
Mark Salgado, 312-368-2080 (Chicago)
Christopher Kimble, 212-908-0226 (Media Relations,
New York)
Fitch Ratings has affirmed the 'B' Rating on Cap Cana, S.A.'s $250 million senior secured notes. In addition, Fitch has assigned a preliminary rating of 'B-' to the expected issuance of $500 million in additional senior secured notes. Fitch's affirmation on the existing $250 million notes contemplates a change to the terms of certain covenants in the indenture relating to the incurrence of additional debt.
also reflects the expected increase in Cap Cana's leverage after the proposed $500 million issuance of additional senior secured notes. Cap Cana's principal activity is the development, construction, operation and administration of a tourist and leisure resort community project in the Dominican Republic. When fully developed, the project will be anchored by six championship golf courses (of which three are Jack Nicklaus Signature courses), the largest inland marina in the Caribbean, several luxury hotels, more than 10,000 housing units, and numerous sports facilities, along with high-end stores, restaurants, spas, and entertainment complexes.
To date, Cap Cana has experienced tremendous success in terms of sales of real estate properties and construction within the project. Accumulated investment in the project is now over $340 million and total sales revenue amounts to over $1 billion.
Cap Cana's first golf course, Punta Espada, commenced operations this past year and is scheduled to host a PGA Champions Tour Event in 2008. Cap Cana has also signed a licensing agreement with Trump Marks Real Estate LLC to brand sales of certain real estate properties. Trump-branded sales of Farallon cliff-side lots proceeded to total approximately $289 million in one day. Additionally, Cap Cana has signed a licensing and management agreement with the Ritz-Carlton Hotel Company for the management of a hotel expected to begin construction in 2008 and begin operating in 2010. Recently, Cap Cana has hired Parsons International, one of the largest management, construction, and engineering companies in the world as Project Manager.
A material security package backs the notes in the event of a corporate default. Both the $250 million issuance and the proposed $500 million issuance will be secured by a first-priority mortgage over unencumbered real estate property, as well as receivables related to the sale of individual property units. The specific real estate that will give rise to receivables is clearly defined and completely separated between the two issuances:
--First-mortgage liens on land equal to a minimum of 200% of the outstanding debt secures the $250 million issuance. The proposed new issuance will be backed 150% by first-mortgage liens.
--Receivables arising from the sale of real estate properties will equal 125% of the outstanding debt from the $250 million issuance. The notes expected to be issued will be backed by 120% in receivables.
Currently, the $250 million issuance is fully collateralized with approximately $350 million in eligible receivables under Trustee control. Phase I products that could give rise to eligible receivables to collateralize the $250 million issuance are nearly fully sold out. Delivery on many of these units will begin in early 2008, with this issuance expected to be fully collateralized by post-construction receivables by the end of 2008.
Phase II products, which will give rise to eligible receivables backing the proposed issuance, include: sales at the Trump Condo Hotel, condominium units at Las Iguanas, which will be adjacent to a new Jack Nicklaus Signature course of the same name, and certain residences within the Green Village development that were not part of Phase I.
The structure backing these issuances adds significant investor protections in two forms:
--Cash flow controls that will reduce project execution risks.
--Bond proceeds sized to the remaining construction costs will be held in escrow and only released upon the achievement of construction milestones. Additionally, a 6-month debt service reserve will be fully funded from proceeds.
Major risks considered in the ratings of the two issuances by Cap Cana remain two-fold. First, sales of Future units must be realized in order to collateralize the transaction and generate additional working capital and general liquidity for the project. Second, construction on individual units must be completed. Fitch believes these risks to be consistent with the expected 'B-' rating on the new issuance and the current 'B' rating on the outstanding notes. The ratings differential is explained by significantly different sales and construction risk profiles between the issuances and a loosening of the collateralization requirements for the new issuance. Independent engineer reports were used to facilitate modeling assumptions, which incorporated downside analysis regarding real estate valuations as well as construction costs.
Fitch currently has a 'B' Long Term Issuer Default Rating (IDR) for the Dominican Republic with a Positive Outlook.
For more detailed information on Cap Cana, see the new issue report titled 'Cap Cana S.A.' dated Nov. 3, 2006, available on the Fitch web site at Fitch Ratings.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, Fitch Ratings. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Fitch Ratings
Sam Fox, 312-606-2307 (Chicago)
Mark Salgado, 312-368-2080 (Chicago)
Christopher Kimble, 212-908-0226 (Media Relations,
New York)