Fontainebleau debt rating downgraded after bankruptcy

Thursday, June 11, 2009 | 1:55 a.m.

Fontainebleau Resort

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Investors in the bankrupt Fontainebleau resort's debt may not recover much of their money through the bankruptcy process, debt rating agencies said Wednesday.

In response to the bankruptcy, Moody's Investors Service downgraded Fontainebleau's corporate debt rating to Ca (highly speculative).

And Standard & Poor's Ratings Services lowered its corporate credit and issue-level ratings to its lowest level, D.

"The recovery rating on the credit facilities was revised to 6, indicating our expectation of negligible (0 percent to 10 percent) recovery for lenders in the event of a payment default, from 4 (30 percent to 50 percent)," Standard & Poor's said.

"We had contemplated a default occurring in 2010, following the opening of the company's Las Vegas gaming facility. Given the funding requirements remaining to complete the project, which exceed our previous estimates for gross enterprise value of the property, we now expect senior secured creditors to realize 0 percent to 10 percent recovery," Standard & Poor's credit analyst Ben Bubeck said in a statement.

The $2.9 billion resort project on the Las Vegas Strip, 70 percent completed, filed for bankruptcy protection after lenders refused to fund $656 million the company said was needed to complete the project.

But even before banks halted funding, Standard & Poor's had warned in February that the resort would be unable to make its $200 million in annual debt payments because of the weak economy that has harmed the Las Vegas gaming industry and the lack of condominium sales at the resort.

Discussion: 4 comments so far…

By rejco100

6/11/09 at 6:49 a.m.

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There it is, this property will be the most expensive Motel 6 in the world; can they afford to leave the lights on?
By neiman1

6/11/09 at 8:28 a.m.

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The longer this project takes to complete and open, the longer existing employees will get to stay on the job in all the other venues. When City Center opens it's going to devastate many of the existing clubs.
By teambeam

6/14/09 at 9:55 a.m.

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OOOHH, City Center...the most horrific looking set-up I have laid my eys on in quite some time....AWFUL
By goingbust

6/18/09 at 11:25 a.m.

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