the strip:

Judge orders mediation for Fontainebleau, banks

Bankruptcy judge says unnamed lender could provide funds

Published Friday, June 19, 2009 | 10:20 a.m.

Updated Friday, June 19, 2009 | noon

Fontainebleau subcontractors say contractor conflicted

Download the judge's order

Businesses file suits claiming Fontainebleau bills went unpaid (6-18-09)
Judge to expedite Fontainebleau bankruptcy case (6-17-09)
Lenders: Cost overruns led to Fontainebleau loan default (6-16-09)
Bank of America wants change in Fontainebleau bankruptcy plan (6-11-09)
Fontainebleau debt rating downgraded after bankruptcy (6-11-09)
Fontainebleau wants expedited hearing on $656 million (6-10-09)
Investment companies sue banks over Fontainebleau financing (6-10-09)
Australian company writes off Fontainebleau ownership interest (6-10-09)
Fontainebleau developer files for bankruptcy; more jobs cut (6-9-09)

With an unidentified party possibly willing to loan money to the idled Fontainebleau Las Vegas resort, a bankruptcy judge has ordered Fontainebleau and banks it is suing to enter mediation in hopes of resolving their disputes.

Judge Jay Cristol in Miami signed the order Thursday.

"The debtors represented at the hearing (earlier this week) that they have an additional unnamed lender standing by to provide funds necessary to complete the project, contingent upon the debtors receiving the draws of money which they claim to be due from the revolving group lenders," Cristol said in his order.

"The financial implications of the dispute are vast and can possibly result in losses to some party or parties of hundreds of millions or even over $1 billion," the order said. "It would be in everyone's best interest if this matter could be resolved in a prudent, businesslike manner rather than through litigation."

Cristol ordered the mediation to occur on or before July 10 and said it would be prudent for the unnamed third-party lender to participate.

While the third-party lender has not been identified, a report this week in the Las Vegas Business Press said Union Labor Life Insurance Co. (ULLICO) and Fontainebleau have recently been in talks about additional financing.

Based in Washington, D.C., and founded in 1927 by the labor movement, ULLICO is still associated with organized labor and has some $5.3 billion in assets under management.

Herb Kolben, chief real estate investment officer for ULLICO, on Friday said ULLICO had not been approached by Fontainebleau about additional funding. If ULLICO is approached, he said the insurance company would consider any deal on its merits.

He said ULLICO has about a 15 percent to 20 percent position as a first-lien lender in a loan for the resort's retail component, which is not in bankruptcy. He declined to specify the amount of the loan, but said it's not in default.

Bankruptcy court records indicate a $315 million loan for the retail component was funded by now-bankrupt Lehman Brothers Holdings Inc., along with ULLICO, Mitsui Trust Co. and National City Bank

While the Fontainebleau retail component is about 50 percent pre-leased, its continued development and opening is contingent on completion and opening of the resort hotel-casino, Kolben noted.

He said problems at Fontainebleau are associated with the economy and that the Miami-based Turnberry companies behind Fontainebleau are "a great organization."

"I fully expect them to come out of this," he said.

Mediation of the disputes between Fontainebleau and the banks likely will be a complex process potentially affecting hundreds of lenders.

Fontainebleau sued Bank of America and other revolving loan banks in April, charging they wrongly cut off funding and it now wants the bankruptcy court to order the banks to release $656 million it needs to get the project back on track.

The banks involved in the $800 million revolving loan agreement this week asserted Fontainebleau defaulted on its credit agreement because of cost overruns and alleged misrepresentations.

Dozens of term lenders in the case, in the meantime, have sued Bank of America and other revolver banks alleging the default reduced the value of the term lenders' collateral by effectively shutting down the project.

And while subcontractor liens and lawsuits are piling up against the project, credit rating agency Standard & Poor's has issued a report suggesting the project itself doesn't make economic sense under its current capital structure.

The economic climate, in the meantime, hasn't helped the project as it was unable to sell condominiums that would have covered substantial construction costs.

In the meantime, the recession has reduced visitation to Las Vegas and hurt hotel-casino operators -- a situation likely to get worse once CityCenter and other new projects open in the U.S. gambling capital later this year and in 2010.

The 63-story Fontainebleau is planned to have 3,815 hotel rooms, a convention center, retail and entertainment offerings; and a casino with 1,700 slot machines, 125 table games, a poker room and a race and sports book.

Discussion: 5 comments so far…

By goingbust

6/19/09 at 11:45 a.m.

Suggest removal

Abandon it, walk away. The banks that are being the biggest impediments in this process will lose the most and justice will be served - RAW!!! HA! HA! HA! HA! HA! (evil laugh)
By nednougat

6/19/09 at 12:36 p.m.

Suggest removal

It's going to be funny if a labor backed insurance company funds a Union loafer job like the F. They'll quickly find out what causes cost over runs and change order requests. Their own people. And there will be nothing they can do about it-The Union mentality is "Don't kill the job, kid". And with the end of commercial construction in Vegas this year, it will be years before they can mangle another project. Well, maybe the airport terminal. But that's about it, loafers.
By neiman1

6/19/09 at 1:03 p.m.

Suggest removal

The union is going to risk the worker's funds to save some jobs for a shot time. I think the fed needs to check this one out in advance? Not living up to their fiduciary responsibility to the members unless Obama has already promised to save it if Fountaineblau fails.
By CynicalObserver

6/20/09 at 1:25 p.m.

Suggest removal

"It would be in everyone's best interest if this matter could be resolved in a prudent, businesslike manner rather than through litigation."

This is a judge's legalese for "I see just one bunch of jerks standing in front of me, and a large number of innocent groups being affected. I will give the jerks a short period of time to "cut it out", and if they don't I will hammer the jerks to the wall.
By AKsilvereagle

6/20/09 at 2:31 p.m.

Suggest removal

What better way to utilize that so called 'lol- IBM building' (although it also resembles the old UCB/1st Interstate Bank building in Hollywood)...

...and make it into a permanent homeless shelter .... everyone would be in a win-win situation , like hedging a point number on a craps layout yanno...

I say Las Vegas in general would be a much cleaner city by housing them homeless loafers, while they can kick the union loafers out of the project so that the homeless can finish the building themselves in exchange for free shelter... what better way of having all them tents on Main Street to disappear...

The funding can come from the federal government with stimulus worthless money dollars to finish the project....yay.

The Salvation Army could relocate and make a world headquarters there ...and have current retail shops along with bringing back them good ol' stores inside the building .....such as :

Goodwill thrift stores, Woolworths, Montgomery Ward, Pic N Sav, Zodys, K-Mart, Wal-Mart, as seen on TV store, the .99c store, the five and dime store, and others.....this would make the Wynn and Encore look 'GHETTO' compare to this.

...have a CAT/Deuce/Greyhound/Trailways Bus terminal inside the parking garage for all your transportation needs.....Ahhh, the intercom sounds of '((( 'NOW BOARDING AT DOOR #4.... BARSTOW, SAN BERNADINO, RIVERSIDE, TEMECULA, SAN DIEGO... NOW BOARDING AT DOOR #4' ))) - is simply priceless !

For the VIP guests, have them stay in rooms named after the real Las Vegas icons that made this town like for example - The Stu Unger Suite.

Have a Mickey Spilantro rewards program, and a Lefty Rosenthal Sports Book room.

Make the place real catchy.

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