Morgans Offering $100 Million Senior Subordinated Convertible Notes

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. October 14, 2008

OCTOBER 11, 2007. Morgans Hotel Group Co. (NASDAQ: MHGC) (the "Company") today announced it has commenced a private offering, subject to market and other conditions, of $100 million aggregate principal amount of Senior Subordinated Convertible Notes due 2014. Up to an additional $15 million aggregate principal amount of notes may be issued at the option of the initial purchasers of the notes within 13 days of the pricing date of the notes, to cover over-allotments, if any.

The notes will be the senior subordinated unsecured obligations of the Company and will be guaranteed on a senior subordinated basis by the Company's operating company, Morgans Group LLC. The notes will be convertible into shares of the Company's common stock under certain circumstances and upon the occurrence of specified events. The interest rate, conversion rate and other terms will be determined by negotiations between the Company and the initial purchasers of the notes. The Company intends to use the net proceeds from the private offering to repay in full the outstanding indebtedness on its revolving credit facility, to fund the net cost of certain convertible note hedge and warrant transactions entered into in connection with the private offering (described below) and for general corporate purposes.

In connection with the notes offering, the Company plans to enter into separate convertible note hedge and warrant transactions with one or more of the initial purchasers of the notes and/or their affiliates. These transactions are intended to reduce the potential dilution to the holders of the Company's common stock upon conversion of the notes.

In connection with these transactions, the hedge counterparties have advised the Company that they or their affiliates may purchase the Company's common stock in secondary market transactions or enter into various derivative transactions with respect to the Company's common stock concurrently with or shortly following pricing of the notes. These activities could have the effect of increasing the price of (or preventing the decline of) the Company's common stock concurrently or following the pricing of the notes. In addition, the hedge counterparties or their affiliates may from time to time, following the pricing of the notes, enter into or unwind various derivative transactions with respect to the Company's common stock and/or purchase or sell the Company's common stock in secondary market transactions. These activities could have the effect of increasing or decreasing the price of the Company's common stock and could affect the price of the notes.

The notes will be sold to qualified institutional buyers by means of a private offering memorandum in accordance with Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"). The notes, the guarantee and the shares of Company common stock issuable upon conversion of the notes have not been registered under the Securities Act, or any state securities laws, and unless so registered, may not be offered or sold in the United States except pursuant to an exemption from the registration requirements of the Securities Act, and applicable state laws.