Australian company writes off Fontainebleau ownership interest

Wednesday, June 10, 2009 | 9:50 a.m.

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More headlines from the Vegas gaming industry

Australian casino resort company Crown Ltd. today said it wrote off its $250 million, 19.6 percent ownership interest in the now-bankrupt Fontainebleau resort development on the Las Vegas Strip.

"Crown also holds debt in Fontainebleau of U.S. $22 million. Crown will review the carrying value of its Fontainebleau debt at 30 June 2009, but expects that it will be written down to nil," the company, based in Melbourne, said in a statement. "Crown is under no obligation and has no current intention to contribute any further equity or debt to Fontainebleau or participate in any restructuring under any bankruptcy arrangements."

The lack of enthusiasm by Crown in pumping more money into Fontainebleau, which filed for bankruptcy Tuesday, isn't surprising.

Crown, run by businessman James Packer, has already taken hundreds of millions of dollars in write downs on its U.S. investments in Station Casinos Inc., Harrah's Entertainment Inc. and on a now-canceled project to build a resort on the Las Vegas Strip at the site of the former Wet ‘n’ Wild water park.

Crown this year also dropped its planned $1.75 billion purchase of Las Vegas-based Cannery Casino Resorts amid regulatory approval delays; and instead paid a $50 million deal termination fee and invested $320 million in the company.

The three Fontainebleau entities that filed for bankruptcy said that combined, they had debt of more than $1 billion, assets of more than $1 billion and more than 1,000 creditors. They have not yet filed a list of secured creditors. That list is important because the secured creditors in a bankruptcy case typically are key players in deciding the future of the debtor.

Fontainebleau Las Vegas LLC, Fontainebleau Las Vegas Holdings LLC and Fontainebleau Las Vegas Capital Corp. all filed for Chapter 11 bankruptcy protection Tuesday in Miami and blamed a group of banks for failing to provide nearly $800 million needed to complete construction of the resort.

Observers, however, have noted the project faced other problems that may have caused the banks to declare an event of default on the loan agreement.

Besides the weak gaming and hotel environment in Las Vegas marked by an oversupply of hotel rooms, there were reports and claims that the $2.9 billion Fontainebleau faced cost overruns, that it failed to sell enough condominiums and that the development was mismanaged.

In announcing the bankruptcy filing, Fontainebleau said it would seek financing to recommence construction of the resort -- now 70 percent complete -- while pursuing its legal claims against the banks.

Discussion: 9 comments so far…

By jaesun

6/10/09 at 10:21 a.m.

Suggest removal

failures. and we lose Wet'n'Wild because of this fiasco?
By bdover

6/10/09 at 10:44 a.m.

Suggest removal

James Packer is proof that sometimes, the apple can fall far from the tree. His old man Kerry was a genius, but his children are dopes. They have blown billions of dollars all over the planet. and can't seem to stop. Australia is a beautiful country, but obviously it has its share of losers, too. Sad...
By rejco100

6/10/09 at 11:28 a.m.

Suggest removal

Maybe they can put a huge pipe through the middle of the building and squirt water out the top; make it a huge water feature for that seedy Las Vegas area.
By tvegas

6/10/09 at 12:35 p.m.

Suggest removal

Another bad investment by an offspring who thinks he's as smart as his dad...he was the guy who bailed on the Cannery at $1.3 billion (lol)..more money than brains
By gettocard

6/10/09 at 1:21 p.m.

Suggest removal

This James Packer guy is such an arrogant loser.I would love to see his dad turning into a zombie and come back to life to kick his ass...
By American_Gaming_Guru

6/10/09 at 1:31 p.m.

Suggest removal

I never got their random investing either.
By davidwayneosedach

6/10/09 at 3:41 p.m.

Suggest removal

Sounds like Crown lost their shirt, pants and socks in this Fountainbleau disaster.
By BorisR

6/11/09 at 6:53 p.m.

Suggest removal

Fountainbleau might qualify as a big waterpark, aquarium or whatever. It will definetely not go through as a casino resort , as long as it tries to become profitable. Even if new owners can grab up that joint for 500 Million or so, I have still doubt that it will generate money. The neighborhood is shady and dangerous and too much crime scene taking place down there these days....
I will stay away from this dangerous neighborhood. Everything between Wynn and Stratosphere Tower is considered as danger zone. So watch out and always keep your hands on the gun while walking there at nights...

From Switzerland

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