Senator Harry Reid criticizes banks that have taken billions in federal bailout dollars
 
Rumors of financial instability have swirled around the Fontainebleau Las Vegas for the past year, as other projects were postponed or cancelled during the economic downturn that is hitting the city hard. Boyd’s Echelon project, the Plaza Hotel, several independent casino projects and a hotel expansion at Caesars Palace have fallen victim to the recession and now it appears that the Fontainebleau is threatened as well.

The property’s parent company, Fontainebleau Resorts, which also operates the hotel of the same name in Miami, has filed a $3 billion suit against a collection of lenders charging that they reneged on an agreement to provide an additional $800 million needed to complete the project. The company, controlled by Miami developer Jeffery Soffer, says that the banks are trying to “walk away from the project and abandon their obligations.”

The suit names some of the world’s largest and most respected banks: Bank of America, JPMorgan Chase, the Royal Bank of Scotland, Deutsche Bank, Merrill Lynch Capital Corp., Barclays Bank, Sumitomo Mitsui Banking Corporation New York, Bank of Scotland, HSH Nordbank and other lenders.

The banks informed Fontainebleau early last week that they would not provide the $800 million in funding because of "one or more events of default" which were not described. Fontainebleau denies that it has defaulted on any of the more than $2 billion in loans it has received to build the Las Vegas project.

Soffer has a powerful ally, however. Senate Majority Leader Harry Reid has weighed in on the side of the Fontainebleau. He says banks that have taken bailout money should not be walking away from their commitments.

“It is wrong, plain and simple,” he said in a statement released by his office. "One of the issues I have been working on hardest is freeing the flow of credit for job-creating projects like this one. When banks, especially ones that have received taxpayer dollars, make a commitment to finance a worthy project with thousands of existing jobs on the line, they have an obligation to keep that promise. I hope this can be resolved quickly because thousands of families are counting on it and so is Nevada's economy."

The Fontainebleau has continued construction even during the downturn. Last month, the company announced it was set to open in October with with 3,815 rooms. Over 1,000 of those rooms were scheduled to be sold as condos, with the company expecting to raise almost $900 million via those sales.

A spokesman for Fontainebleau said the company has $130 million in reserve and will use that to keep the project going, but Soffer admits that the pulling of the $800 million revolving credit line threatens the completion of the project and more than 6,000 jobs that will be created.

Fontainebleau is a joint venture between Soffer’s Turnberry Associates, a condo developer, and a group of Las Vegas casino executives led by former Mandalay Bay President Glenn Schaeffer.

By Staff

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