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July 31, 2014

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Fontainebleau workers laid off amid funding concerns

Work continues at jobsite as resort negotiates with banks

Fontainebleau Resort

The Fontainebleau, construction stopped, is seen dark along the Strip. Launch slideshow »

A Fontainebleau Resort spokesman today said construction workers are being laid off because of financing problems at the $2.9 billion resort on the Strip.

Spokesman Dave Satterfield said some subcontractors are cutting staff, leaving them with only skeletal crews, although construction on the resort is continuing. He didn't know how many workers have lost their jobs because of funding concerns.

Fontainebleau is continuing to negotiate with Bank of America for financing.

"This is affecting people's livelihoods like we said it would," Satterfield said.

The banks were sued last week by Fontainebleau, which is planning to open this fall, after allegedly declaring a default on the part of Fountainebleau. Fontainebleau is accusing them of breaking the terms of the $800 million loan agreement.

"The subcontractors' decision is to be expected given that the banks abandoned their lending commitment. This development underscores how vital it is for the banks to meet their contractual obligation to fund Fontainebleau Las Vegas," Satterfield said in a statement.

In its lawsuit, Fontainebleau says it attempted in March to draw $670 million available under its revolving loan, along with another $350 million available under a term loan. Bank of America refused and Fontainebleau resubmitted its request, this time arguing that the revolving funds, according to the loan agreement, should be made available once the term loan was fully drawn. Bank of America refused again and Fontainebleau eventually requested only the amount available under the term loan.

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