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The Fontainebleau Resort on the north end of the Las Vegas Strip is shown under construction in April.
Published Tuesday, June 9, 2009 | 8:05 p.m.
Updated Tuesday, June 9, 2009 | 9:21 p.m.
Sun Archives
- Outlook for Fontainebleau slides from bad to worse (6-8-2009)
- Fontainebleau: Bank wanted to minimize Cosmopolitan competition (5-12-2009)
- Fontainebleau glazing contractor no stranger to overcoming adversity (5-6-2009)
- Fontainebleau workers laid off amid funding concerns (4-30-2009)
- Union: Banks putting jobs in jeopardy over Fontainebleau (4-29-2009)
- Sued by Fontainebleau, banks could cite ‘act of God’ as defense for refusing funds (4-29-2009)
- In Fontainebleau's PR battle, banks have yet to talk (4-27-2009)
- Berkley wants talks with Obama administration on Fontainebleau (4-27-2009)
- Fontainebleau files $3 billion suit over funding (4-23-2009)
Sun Coverage
The developer of the stalled Fontainebleau resort on the Las Vegas Strip filed for bankruptcy protection Tuesday in Miami and disclosed more jobs will be cut at the company.
Fontainebleau has been in a dispute with banks that refused to provide financing to continue the project over an unspecified event of default in a loan agreement. Reports have suggested the resort faced cost overruns, liens were piling up against it and that its financing was difficult for the banks because of a lack of condominium sales at the resort. In addition, a contractor sued the company alleging mismanagement and a key executive and founder, Glenn Schaeffer, resigned as chief executive on May 29 for undisclosed reasons.
Fontainebleau Las Vegas LLC and two of its affiliates (Fontainebleau Las Vegas Holdings LLC, Fontainebleau Las Vegas Capital Corp.) said they filed voluntary Chapter 11 reorganization petitions.
“The decision to file for Chapter 11 was the direct result of certain lenders having refused to honor their contractual commitments to provide nearly $800 million in construction funding for the $2.9 billion resort-casino project, which is 70 percent complete,'' the company said.
“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,” said Howard Karawan, chief restructuring officer of Fontainebleau Las Vegas. “Our goal now is to secure funding to complete this world-class project and restructure our existing debt.”
Fontainebleau Las Vegas said it has reached a provisional agreement with a group of its non-defaulting lenders for the use of cash for the administration of its bankruptcy case, and is simultaneously in negotiations to obtain financing to recommence construction at the project. The near-shutdown of the project has resulted in the loss of some 3,000 construction jobs.
And Fontainebleau, which itself laid off about 40 employees May 18, said Tuesday another 56 employees are being laid off in conjunction with the bankruptcy filing. That will leave about 100 employees remaining at the development company.
Turnberry West Construction Inc., the project’s general contractor and builder of several high-rise condominium complexes in Las Vegas, is not included in the filing.
Fontainebleau Las Vegas also announced that it withdrew without prejudice its $3 billion lawsuit in Las Vegas federal court against certain lenders and refiled the case in the U.S. Bankruptcy Court in the Southern District of Florida, Miami Division, where the Chapter 11 petitions were filed.
Fontainebleau Las Vegas originally filed the lawsuit on April 23 against Bank of America, JPMorgan Chase Bank, Deutsche Bank Trust Company Americas and certain other lenders after Fontainebleau said they reneged on their contractual commitments to provide the company with almost $800 million in prearranged funding. The lawsuit was amended on May 12 to include allegations that Deutsche Bank Trust Company Americas was “seeking to destroy the Fontainebleau in order to minimize competition” with the under-construction Cosmopolitan Resort and Casino on the Las Vegas Strip, which is wholly owned by a Deutsche Bank subsidiary.
Those banks that have discussed the case have denied wrongdoing, but for the most part they have declined comment as they have faced public criticism and political pressure to keep the project alive.
No one has publicly disclosed the alleged event of default that caused the banks to stop financing for the project.
“Fontainebleau has not been told what the event of default is,” spokesman Dave Satterfield said Tuesday.
"Fontainebleau Las Vegas will continue to aggressively prosecute claims against these lenders for failing to honor their contractual commitments," said Scott Baena of Bilzin Sumberg, bankruptcy counsel to the company. "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."
The parent company of the Turnberry companies is based in Miami, which is why the court filings were made there. Satterfield said the transfer of the lawsuit against the banks to the bankruptcy court should expedite the handling of the dispute.
this do not look good at all
I am glad this is happening because it's their fault for not catering to locals that they went bankrupt.
It's obvious what happened. The F engineers and architects didn't do their jobs, and the Union loafers ate them up with Change Orders. The F's employees didn't tell the banks about the cost overruns until recently. Now the sh*t has hit the fan, and guess what? Even with a BK filing, this project that is located at a sorry area of the Strip is dead in the water. Wanna buy a condo in a 63 story building with a beautiful view of another failed project. Echelon? Who in God's name would decide to finish a project that started at 2 Bil, and is now projected at 3.5 Bil? Maybe the Sprinklers Fitters Union? The Union Craftsmen? No, even they aren't that stupid. I think..
This town is so screwed on so many levels-and it's far from over.
Seriously, could this building be any more of an eyesore?
How much imagination goes into designing a tall blue box?
Steve Wynn uses such genius the way he and his team design their projects.
This one? Implode it.
You fricken people just don't know how frustrating this really is. I had a long term, lock job there and the rug was pulled out from under from me because of the financier's who got bailout monies and decided to weasel out of their obligations. Yeah, the job had cost over-runs, yeah, the management team there wasn't the greatest, but I tell you this. That building and what it was about to bring to Vegas in terms of financial goodness---justified all. Screw any of you folks that wanna bash the unions that worked on this project. Scab labor would have buried this job one week into it!!!
10-4 scotty; we will continue to weed out the non-essentials and get these projects completed, maybe 1-by-1, but with the people we can trust
Just bring back the good ol days of the Showboat, Desert Inn, Landmark, Dunes, El Morocco, ..Hell, I'd even consider the Stardust and the Frontier too......(they kicked me out of the Sands in 1989 so I was glad to see it imploded..... just wished the staff who wrongfully accused me of stealing tip money that day were inside the building during the implosion though).
That Fon'tainted'bleau to me resembles the Rio tower building ....that is consideribly overweight.
This city needs to look at the big picture and understand that adding more rooms or condos will just make things worse.
This city has mainly relied on the Baby Boomers from California for the past 20 years or so. That party is over. The Boomers are paying their debt and preparing for retirement. They will be doing things like taking cruises to more interesting places in retirement since they have more time.
This half finished resort should be imploded and sold for scrap.
WHY DIDN'T FOUNTAINEBLEAU DO AN IPO RIGHT NOW BEFORE ITS OPENING?
It's sad to see that the Fountainebleau developer had to file for bankruptcy. What a let-down by the banks. I wonder if it wouldn't have made sense to do an IPO of the Fountainebleau to raise necessary funds as Wall Street is in a funding frenzy right now anyway. Wynn Resorts did an IPO many years ago and a few years before the Wynn LV was finished and opened, and WYNN has been an excellent stock over the years.
Maybe the government will bailout give the union 50 % ownership and call it Fauxunionbleau
i think mrvincent and mike123 are right on. i love vegas. just love it, but i really do think it's falling apart.
i just can't see how we are ever going to get enough people to come to this town, and spend enough money to keep these rooms filled and condos sold.
and also, gas prices are starting to creep up again, just like last summer.
it's not good, folks.
The FountainBleau did not suffer from mismangement, it suffered from no high level mangement and indecisions .If Glenn Schaefer was such a guru to the casino business, he sure let the ball down by not providing leadership as the CEO of the project.IF he walked away, he should have and be totally humbled by his role as CEO!
Maybe if their entire Board of Directors had kept an eye on things, thousands of people would not be out of a job. They should be the ones to answer for their actions or lack thereof to those who are standing to lose their homes and lives in Las Vegas.
If anything, it appears that there was no one around to make decisions and keep change orders at a minimum , as well as hire local businesses and designers.
Lack of oversight. it seems from a Board of Directors caused cost over runs in a down-turn economy with no clue on how to manage what would have been a boom to Las Vegas. To busy being everyplace except where they should have been.
Crown group does not want to put any more money in it, because they want to buy it in a bankruptcy proceeding.
To bad that so many "so-called experts" thought they could pull it off on their reputations and their names. Another black face for Las Vegas, and more foreclosures for former employees.
It's called cost controls. Bechtel used to employ the sorriest dweebs I've ever met to record every dime spent on a project. I worked in contracts, and was driven crazy by the dweebs questioning everything. But you know what? The owner and the GC knew exactly where they stood financially. Even working with union loafers, who were determined to drive the costs through the roof. This failure is the result of poor management. Nothing less...
At the end of "Casino" (1995) Frank Rosenthal (Robert de Niro) laments how with the fall of the gangsters who ran Vegas, the new operators are corporations who finance projects with junk bonds. The interest on junk bonds is high, but at least its not as high as a loan from the mafia. But who could have imagined that corporations could screw things up this bad with City Center, Echelon, and Fountainebleau?
Fontainebleau, as with most construction projects had many issue's with leadeship, communication, and union contracting which drove up the cost. In a normal economy where occupancy is high in Vegas this project would have been completed on schedule. The banks knew a bankruptcy was coming due to a likely daily loss of 1M upon opening due to the huge debt they were carrying and our awful economy. Simple economics, force the BK now by cutting off the credit lines or be a biger part of a BK just after opening. The stimulus money isn't being spent and TARP funds aren't for items like this so like every business should, Fontainebleau will ultimately have to make money on it's own or close up shop. This is what is now and will always be great about our country. Like it or not.
Can you blame the banks for bailing? Come on!Has to be the ugliest box of a building, no condo sales and a collapsed baby boomer market. In the current economic climate, who would buy that monstrosity for even .10 on the dollar? All of us got wiped out, our 401K's, investments, wages. And the LOST WEALTH IS NOT COMING BACK FOR A LONG TIME! "Vegas will come back" Hey pal, this is not your father's rescission!In terms of disposable income, Vegas right now doesn't even register on the radar screen.
you are right, frankm507:
i think A LOT of these condos were built on the concept of baby boomers selling their home in ohio, indiana, iowa, etc. and taking that equity and that fat 401k and coming to vegas to retire in a "worry-free" high rise setting.
now, those baby boomers have no equity in their homes, the 401k is shot, and they are going to have to work another 5 years.
buying a condo in vegas is the last thing on their mind.
when they get done building city center, this town is going under. all those construction workers will have to leave town to find work and that will kill the local economy.
I wish City Center a great deal of luck!
They are not paying their contractors in Miami, so why would anyone think they would pay them in Las Vegas. Howard Karawan was the face that was used for all the news stories in Miami. If he is talking, I would have someone check every word he says.
The local news channel did a story on how FB spent $5 million on their grand opening and still have not paid their contractors. For the last several months, all they say is that the auditors are checking the books before anyone gets paid.
So I hate to say it, but you guys that are owed money are going to learn that ()this was your butt before Fountainbleau, and ( ) this is you butt after dealing with Fountainbleau.
"Vegas will come back" Hey pal, this is not your father's rescission!In terms of disposable income, Vegas right now doesn't even register on the radar screen".
So....where is it any better?
Vegas is now forced to rely on the residents. I'm gonna stick around and see how it plays out. Plus all of my family/friends continue to visit because....we do still register on the radar screen. Maybe not where the Strip is concerned, but trust me, we register.
You mean...
that (_(_) this was your butt before Fountainbleau, ...and (_O_) this is you butt after dealing with Fountainbleau.
I can see those College Degrees are sure worth it. What a mess these arrogant (_(_) have made of this once great country.
The biggest conjob out there is this notion a rookie with a college degree knows more than experienced mature adults.
So the responsible now are required to clean-up the mess these morons have made? Yep seems that way as you wonder why your wealth is being sucked away.
Yes it is unfortunate that colleges do not teach morality and good values. This is what the parents taught to their kids who attended those colleges.
It appears to me after reading all the articles about Fontainebleau Resorts that all the banks involved in this case should contact the company that Fontainebleau Resorts used to help them recover overpayment to their subcontractors called CCCS International to assist them in this case. That company from South Carolina saved Fontainebleau Resortsover $40 millions dollars and that company along with all the others are set to loose out due to the fact that Fontainebleau Resorts clearly did not know what they were doing but one company did and that is the company CCCS International that was reported in your paper on May 15, 2009.
It is common knowledge that there are other countries able to design and build high-rise and casino resorts in record time and some are even architecturally superior to the Las Vegas area gaming facilities.
These projects can be built on time when proper planning is implemented; which is planning that is all encompassing, fully coordinated, and inclusive of all building systems being constructed. A construction schedule and a design schedule are also helpful. These are basic concepts for construction and the quick draw reactive method just doesn't get you there and never has worked efficiently.
I suggest that a thorough look at the general contractor is warranted here. The continued deflection from the general contractor stating that, "the owner and the design team have not produced a complete and timely design" is just that, deflection.
Remember that the owner and the general contractor on this project are one and the same. Their relationship is separate enough to present the legally or politically correct picture, but they are all equal in responsibility here.
This general contractor directs and is directed by the owner. Does this sound like good directions for a build of this magnitude? It is more like a continual dysfunctional family squabble. There are no "the buck stops here" bosses at Fontainebleau, but there are plenty of "let's send that design issue around the table again, and again, and again, Superintendents, Coordinators, PMs, and Execs etc...
So the questions remain; who has the expertise required for building this project? Answer: No one at Fontainebleau or Turnberry... Why after all these months is this building not structurally complete with exterior walls and a roof? Answer: Turnberry West Construction " Why are all the answers a pointed finger to someone else? Answer: Turnberry West Construction standard operating procedures"
Last but not the least; who is responsible for the impact on thousands of lives currently trying to survive financially while draining the short supplies remaining in the Unemployment and Social Services pools? Answer: Turnberry West Construction and their world class managers and executives who control the sequence of the build. It is just that simple; the construction experts or general contractor informs the owner and the design team of all potential impacts to the sequence of the build. They also advise them on what to accomplish first and the rest of the sequence follows for an intelligent construction build.
Get a qualified general contractor on this project fast and salvage what's left. This project has some of he best Subcontractors and Designers in Vegas and they can definitely get it built and on time. Get the leadership under control and build the Fontainebleau. Other countries can do it and so can we? There are thousands of families counting on this"