XS Cargo Income Fund (the "Fund") (TSX:XSC.UN) today announced that it has
reached agreement in principle as to the terms of revised financing agreements
with the lenders of its $12 million subordinated debt and of an amended credit
facility with the Canadian Imperial Bank of Commerce ("CIBC") which provides the
Fund's senior term loan and operating facilities.


Michael McKenna, President and Chief Executive Officer of the Fund stated, "We
are very pleased to have these agreements in place with our lenders. Management
can now focus its efforts on maximizing the Fund's sales and profits during the
upcoming holiday shopping season."


The material terms of the new financing agreements for the subordinated debt,
(the Subordinated Debt Transaction") which is held equally by CIBC Leveraged
Finance and Famous Brands Inc.(a company owned by Michael McKenna, the Fund's
President and Chief Executive Officer and largest unitholder) include:


- the expiry date of the subordinated debt facilities has been extended to June
30, 2009


- the interest rate on this financing is increased from 16% to 18%, with the
cash pay interest remaining at 8% and the remaining 10% interest being
capitalized


- each of CIBC Leverage Finance and Famous Brands Inc. will receive 500,000
warrants to purchase trust units of the Fund, at an exercise price of $0.60 per
unit at any time over the next 3 years


- an amendment fee of $150,000 ($75,000 to each lender) is to be paid.

The material terms of the amended credit facility with CIBC are:

- the expiry date of the CIBC financing has been extended to April 30, 2009

- the pay down of the senior term debt (currently $11.25 million) by $4.5
million on or before December 31, 2008


- the financial covenants to be maintained by the Fund have all been amended or
adjusted, and the Fund is now in compliance with all such financial covenants


The transactions are expected to close in early October, 2008 and are subject to
certain closing conditions, including finalization of definitive agreements for
the Subordinated Debt Transaction and obtaining final approval of the Toronto
Stock Exchange as to the issue of the warrants.


The Subordinated Debt Transaction was negotiated with and approved by a special
committee of the independent of directors of XS Cargo GP Inc, the administrator
of the Fund. Deloitte & Touche LLP has provided the special committee and board
of directors with its opinion that the Subordinated Debt Transaction is fair,
from a financial point of view, to the unitholders of the Fund.


Due to the participation of Famous Brands Inc. in the Subordinated Debt
Transaction, the Subordinated Debt Transaction is a related party transaction
for the purposes of Multilateral Instrument 61-101 and the Fund is relying on
exemptions from the formal valuation and minority approval requirements of
Multilateral Instrument 61-101, based on a determination that the fair market
value of the Subordinated Debt Transaction, insofar as it relates to the Famous
Brands Inc., does not exceed 25% of the Fund's market capitalization. A material
change report will be filed less than 21 days before the closing date of the
transactions. This shorter period is reasonable and necessary in the
circumstances as the Fund wishes to complete the transactions in a timely
manner.


Mr. McKenna and companies owned or controlled by him currently own 5,866,450
special voting units and 305,000 trust units of the Fund, representing
approximately 51% of the outstanding voting units of the Fund. Assuming the
exercise of all of the 500,000 warrants to be issued to Famous Brands Inc.
pursuant to the Subordinated Debt Transaction, Mr. McKenna and companies owned
or controlled by him would then own 5,866,450 special voting units and 805,000
trust units of the Fund, representing approximately 53% of the outstanding
voting units of the Fund, not including the warrants issued to CIBC Leveraged
Finance, or 51% on a fully diluted basis.


Business of the Fund

The Fund owns a 51% indirect interest in XS Cargo Limited Partnership which
operates 40 closeout retail stores in Alberta, British Columbia, Manitoba,
Saskatchewan, Ontario, Newfoundland, Nova Scotia and New Brunswick.


FORWARD LOOKING STATEMENTS

This press release contains forward-looking statements. All statements other
than statements of historical fact contained in this press release are
forward-looking statements. You can identify many of these statements by looking
for words such as "believe", "expects", "will", "intends", "projects",
"anticipates", "estimates", "continues" or similar words or the negative
thereof. These forward-looking statements include statements with respect to the
amount and timing of the payment of distributions of the Fund. There can be no
assurance that the plans, intentions or expectations upon which these
forward-looking statements are based will occur. Forward-looking statements are
subject to risks, uncertainties and assumptions, including, but not limited to,
those discussed elsewhere in the press release. There can be no assurance that
such expectations will prove to be correct.


Some of the factors that could affect future results and could cause results to
differ materially from those expressed in the forward-looking statements
contained herein include, but are not limited to, those discussed under "Risk
Factors" in the Fund's MD&A and in the Fund's Annual Information Form.


The forward-looking statements contained herein are expressly qualified in their
entirety by this cautionary statement. The forward-looking statements included
in this press release are made as of the date of this press release and, except
as required by law, the Fund assumes no obligation to update or revise them to
reflect new events or circumstances.