Cap Cana Loses Rudder

by Dan Shirai Cap Cana has its back up against a wall. The Dominican developer has an enormous high-end resort still in need of significant investment and it is fast running out of cash. Some investors say it should never have got itself into this situation since the bond providing the funds was supposedly structured to eliminate this risk. But in January, Cap Cana entered technical default by failing to replenish a debt service reserve account. The issuer’s dance with creditors began in the second half of last year, when it wrangled with a group of seemingly unyielding hedge funds, getting them to accept a 40% haircut on a loan that matured mid-November. The hedge fund lenders, whose names have not been disclosed, said they felt mistreated by the company.  As of mid-February, Cap Cana hoped to exchange bonds for new notes in a transaction it bills as favorable to...