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Thursday, Dec. 3, 2009 | 9:51 a.m.
Sun Archives
- Fontainebleau retail component seeks bankruptcy protection (11-27-2009)
- Contractors make another bid for Fontainebleau (11-26-2009)
- Penn National’s bid sets up auction for Fontainebleau (11-5-2009)
- Fontainebleau subcontractors organize to finish project (11-17-2009)
- Fontainebleau developer plans appeal of rulings (11-2-2009)
- Subcontractors fall short in effort to move Fontainebleau case (10-26-2009)
- Executive named examiner in Fontainebleau bankruptcy case (10-16-2009)
- Fontainebleau president among execs leaving project (10-15-2009)
- Fontainebleau a symbol of bad timing, not the only victim (10-12-2009)
- Fontainebleau judge wants quick sale of bankrupt project (10-2-2009)
- In reversal, Fontainebleau lenders suggest liquidation (9-25-2009)
- Fontainebleau: Bank no longer ‘seeking to destroy’ project (9-17-2009)
Lenders owed $1.048 billion in the Fontainebleau Las Vegas bankruptcy case sued hundreds of construction companies Wednesday as disputes escalated over liens filed against the project by lenders and contractors.
The 342 contractors and other mechanics lien holders, some of which claim to be owed $467 million for work on the mothballed casino resort on Las Vegas Boulevard, have been pressing for the right to take over the project with a credit bid for what they are owed.
Financier Carl Icahn, in the meantime, is moving ahead with plans to buy the project during an auction next month. Icahn has offered $156.2 million in cash and financing as the auction's stalking horse bidder.
Regardless of which entity acquires the 70 percent-complete resort, investors, lenders, contractors and other creditors potentially face huge losses because the auction is expected to yield just pennies per dollar owed by Fontainebleau.
Besides the $1.048 billion owed to banks and other syndicated lenders such as investment funds, Fontainebleau owes another $675 million to bondholders.
Construction on the 3,815-room casino resort and its retail complex was halted this summer after Bank of America and other lenders stopped lending to Fontainebleau because of cost overruns and other problems.
Wednesday's lenders' lawsuit was filed in Fontainebleau's bankruptcy case in Miami by attorneys for the lenders' administrative agent, Wilmington Trust FSB, a federally-chartered savings bank that is part of Wilmington Trust Corp.
The lenders, including Bank of America, charge in the lawsuit that the liens filed by the Fontainebleau subcontractors are inferior to liens filed by the lenders in 2005 and 2007 because:
--The lenders and Fontainebleau explicitly agreed that the lenders would loan money to the project only on the condition that the contractors' interests would be subordinated to the lenders' interests.
"The mechanic lien claimants, which expressly agreed to subordinate their interests to `any lender' on the project, now dispute the enforceability of those agreements under Nevada law," the banks complained in their lawsuit.
--General contractor Turnberry West Construction Inc. and its subcontractors were required to obtain performance and payment bonds to ensure they were paid if Fontainebleau failed to pay them and that they obtained more than $500 million in bonds -- but have failed to make claims against those bonds.
The lawsuit also asserts some the liens are invalid or were filed in error because:
--Some contractors were not properly licensed
--Some of the liens failed to allocate claims between different Fontainebleau structures and improvements
--Some of the liens overstate the amount due
--Some of the liens involve work when the project was not properly permitted
--Some of the liens involve defective work
The lawsuit asks the bankruptcy court to declare the lenders, based on their credit agreement with Fontainebleau, have claims superior to those of the contractors.
The latest lawsuit brings to at least five the number of lawsuits over Fontainebleau contractors' liens -- four filed by contractors are pending.
Complicating the banks' case is the involvement of Turnberry West Construction, which like Fontainebleau is controlled by Miami developer Jeff Soffer and his Turnberry Associates company.
Soffer's Turnberry West Construction this summer filed one of the contractor lien lawsuits against Soffer's Fontainebleau Las Vegas casino resort company. That lawsuit sought to invalidate the terms in the credit agreement subordinating the rights of contractors to those of the lenders.
The lenders, in their lawsuit Wednesday, said they would move to consolidate their case with the Turnberry West lawsuit and that they plan to file a counterclaim against Turnberry West.
I will say one thing,if Carl Icahn can get this place for $156M ,it would be the deal of the century for him. If nothing else,land alone.
This is getting very interesting. If the General Contractor and the subs were required to provide payment and performance bonds covering their contract award amount, why are they not pursuing their claims against their insurance/bond providers? Wait a minute, the subs haven't defaulted-they've left the job due to non-payments. My guess is that the subs are hampered by the GC, who is in bed with Soffer. By not going after the major bond provider, GC Turnberry effectively halts any actions by the lower tier's bonding company. In other words, the subs insurance only covers completion of its work-say plumbing-but how does the bonding company complete the plumbing work if the GC is insolvent-or at least disabled? The job is abandoned!
Now we see how Carl Icahn will be able to get the FB for a dime on a dollar. Nobody agrees with anybody, because the banks won't give another penny to the Owner, so the Owner doesn't give another penny to the General, so the subs don't get another penny from the General, the suppliers don't get a penny from the subs, etc, etc...
It's obvious that the judge, who just wants to get this cluster*uck over with, will award the remains to the "highest" bidder. I hope it's Carl, since he may be one of the few who can actually straighten out this mess. Stay tuned.
Right, CynicalO?
It's funny so see them all fighting over pennies on the dollar. The outcome is one of these possibilities: that the lenders will have priority over the pennies, that the contractors will have priority over the pennies, or that the pennies will be split up.
Everyone is getting screwed on this deal unless someone bids more than the $156.2 million that Ichan has bid on this project. According to the article, $2.19 billion is owed (lenders $1.048B, contractors $467 million, bondholders $675 million). Ichan's bid is 7.1% of the mony owed. Everyone is going to get screwed.
NN's summary above is as flawed as the idiotic allegations in the suit that was filed by the lenders. A payment and performance bond is issued by a GC and/or subs to insure the porperty owner/developer that the sub will perform its work and pay its obligations for labor and materials. There is NO such thing as a bond that pays off the GC's or subs for the owner/developer's failure to pay. The suit is full of inaccuracies like that. The banks are actually trying to screw the subs out of the first claim on the funds that will be paid for the property by Icahn or another.
Now wouldn't have been nice to have just kept the beautiful and historic old Algiers Hotel here on this site. I sure miss the place and the wonderful owners. At least they cleaned up on the sale of the property for many millions of dollars!
Have to agree with vegas222. Read again the reasons the liens are supposedly invalid. This exactly the kind of b.s. big-wigs and lawyers come up with when it's time to pay up. Usually the last 10-15% owed is the hardest to get. Developers know that a small contractor does not have the resources to fight them, so many simply find bogus reasons to screw the little guy--in the rear end, if you will.
Don't agree, Vegas 222. Read my post again. The Owner has the right to require a subcontractor to post a bond to complete THEIR work, too. This doesn't mean that anybody gets paid for completing the work, it means that the bonding company will get the work done somehow due to default. Nothing I wrote says the sub gets "paid off". Or the GC, for that matter. A bond is simply a guarantee that the work gets done, somehow. Like if a sub goes BK. BTW-The bond is not issued by a GC or sub, it's issued by an insurance/liabilty company.
You must be a Union Craftsman. Sharp as an eraser.
nednougat:
You wrote that "If the General Contractor and the subs were required to provide payment and performance bonds covering their contract award amount, why are they not pursuing their claims against their insurance/bond providers?"
This sentence reads that "they"--the gen. contractors and subs--could somehow "pursue their claims against their (own?) insurance providers."
I'm no English professor, nor am I a genius. But people who write muddled up garb like that should not throw stones at lowly Craftsmen.
Here's the deal ...
The article is somewhat confusing as it states , " - General Contractor Turnberry West Construction Inc. and it's subcontractors were required to obtain performance and payment bonds to ensure they were paid if Fontainebleau failed to pay them ... "
1) Required by who ? A) The primary lenders.
2) The Lenders advance funds to Fontainebleau , who pays the GC-Turnberry draws - and from those funds , inturn pay their subs.
3) So who's performance is being insured ? and to whom ? A) Fontainebleau to their GC and subs.
4) The lenders required the bonds to insure against unpaid mechanic liens and in the event of a failure in performance by FB.. Thus , those who are subject to protection under such bonds should be making claims.
5) "... but have failed to make claims against those bonds". A) There will be claims when the contractors credit bid is denied.
First I'de like to say thank God for the First Amendment, this way I will get a chance to say things I want to say to you nednougat! For weeks I've seen your comments and think you have a real problem with Unions and Organized labor!Secondly if not for Union people, people would be bagaining for their jobs daily and there would be some much onsite termoil the project would never get finished. Fights and descrimination would occure daily. There would be more homacides because of the back stabing of fellow employees so others could get ahead with bosses. Employers could change the rules to suite letting people go for a number of reasons! I think you must have been Union at one time and someone probably let you go because you couldn't measure up in some way. With all that said I think you probable fit in well with some company where little was expected from you in any kind of daily productivity or you know someone. I think your probably the President of a local ROUND MOUTH CLUB.
Thirdly all these problems and indecisions are made from Ceo's and Execitives that have nothing better to do than sit and think, makeing better than low six figure salaries. If Mr.Icahn is as smart as businessman as he seems to be,I'm sure he has a plan unanounced to you!!
ITS AMAZING TO SEE ALL THE UNEMPLOYED BRAIN SURGEONS AND THEIR INTELLECTUAL OBSERVATIONS AND COMMENTS. "DUUUHHHH THE GC PAYS DUUUHHH SUBS, DUUHHHH BONDS PAY DUUUHHHH SUBS DUUUHHHH DUUUUHHH GC PAYS DUUUHHHH". WHO ARE YOU KIDDING, SERIOUSLY? NOBODY GIVES A DAMM WHAT YOUR TAKE IS ON ANYTHING, ESPECIALLY WHEN YOU ITS SO OBVIOUS TO EVERYONE HERE EXCEPT YOURSELVES THAT YOU DONT HAVE A CLUE AS TO WHAT YOU ARE TALKING ABOUT! DUUUUHHHH BONDS DUUUUHHH GC DUUUHHH THE SUBS DUUUUHHH DUUUHHH! AND THEN YOU ARE ARGUING WITH THE NEXT GUY BECAUSE "HE DOESNT KNOW WHAT HES TALKING ABOUT". WHAT A JOKE, REALLY! JUST FINISH THE BUILDING GET EVERYBODY WORKING AND THATS IT! SIMPLE! JUST AS USUAL ITS GOING TO TAKE NYC MONEY TO GET THE JOB DONE RIGHT, JUST LIKE TISHMAN FINISHED CITYCENTER, ICAHN WILL FINISH F'BLUE! NO ROCKET SCIENCE JUST FACT DUUUHHHH! ANOTHER THING MORONS, IF YOU ARE SO IN TUNE WITH FINANCING AND TRY TO MAKE YOURSELVES OUT TO BE A "WARREN BUFFET" WHAT THE HELL ARE YOU READING OR BLOGGING IN THE "LAS VEGAS SUN"? LMAO!
Whoever the new owner happens to be, the best thing that could be done is to not use any of the contractors that have been on the project from the beginning. With the amount of money spent on this project an audit of expense spent today could reveal that money spent was not for the construction of the property. Seems strange that the Fontainebleau with and estimated cost of 1/3 that of City Center could not have been finished. Something to think about!