Vol. 7 • No. 22 • June 15, 2009 - Print This Issue
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Vol. 7 • No. 22 • June 15, 2009, Cover Stories
Fontainebleau Fails
Strip property has been in financial trouble since a number of lenders backed out of the project and now seeks bankruptcy protection.
Fontainebleau Las Vegas and two of its affiliates filed for Chapter 11 bankruptcy protection in Florida last week.
The move ends almost two months of speculation that the company would have to file. The $3 billion project has more than $1 billion in assets against more than $1 billion in liabilities.
The decision to file was primarily motivated by a number of large lenders backing out of the project.
"It is unfortunate that our lenders forced us to take this step. By reneging on the revolving credit facility, they effectively shut down the project and put thousands of people out of work," Howard Karawan, chief restructuring officer of Fontainebleau Las Vegas, said in a statement Tuesday night. "Our goal now is to secure funding to complete this world-class project and restructure our existing debt."
Fontainebleau Las Vegas has reached a provisional agreement with some of its lenders, and it plans to look at negotiations to obtain financing to recommence construction on the project.
As part of that move, it dropped a $3 billion lawsuit filed against a number of lender in Las Vegas and re-filed in bankruptcy court.
Fontainebleau's attorneys filed the lawsuit April 23 against a group of banks led by Bank of America and JP Morgan Chase after they reneged on an agreement to provide $770 million in financing to complete the project. The banks said Fontainebleau had defaulted on a loan, a claim the developer has denied.
"Fontainebleau Las Vegas will continue to aggressively prosecute claims against these lenders for failing to honor their contractual commitments," Scott Baena of Bilzin Sumberg, bankruptcy counsel to the company, said. "The damage caused by the bad faith of these lenders has not only caused financial hardship to Fontainebleau Las Vegas and its employees, but also to the company's creditors throughout the United States, when economic circumstances are such that they can least afford it."
Affiliates Fontainebleau Las Vegas Holdings and Fontainebleau Las Vegas Capital Corp. submitted separate filings.
Fontainebleau Las Vegas Holdings listed less than $50,000 in assets against more than $1 billion in estimated liabilities, while Fontainebleau Las Vegas Capital Corp. listed similar assets and liabilities.
After the filing, Crown Ltd. wrote down the value of its 19.6 percent equity stake in Fontainebleau Resorts LLC to zero.
The carrying value of $22 million of debt in Fontainebleau is also expected to be written down to zero, the company said in a statement today. Crown has no plans or obligations to contribute further cash to Fontainebleau, it added.
Crown head James Packer spent $250 million to acquire the stake in 2007.
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