gaming:

Moody’s: Fontainebleau could default on debt

Wednesday, March 4, 2009 | 2:34 p.m.

S & P: Fontainebleau could have trouble making payments (2-20-09)
Fontainebleau has the cash to keep rising (1-19-09)
Beneath its skin, Fontainebleau has something extra for guests’ gadgets (1-19-09)

Due to the worsening economy and decline in visitation numbers in Las Vegas, Fontainebleau Las Vegas won’t be able to sell enough condos to reduce construction debt by the time the resort opens later this year, Moody’s Investor Service said today.

Although the company appears to have sufficient cash to complete the project, the negative rating outlook reflects that Fontainebleau could default on debt obligations if visitation to Las Vegas doesn’t significantly improve, Moody’s said.

The $2.9 billion Strip resort, under construction north of the Riviera and south of the Sahara, is expected to open in October with 3,185 rooms. Developers hope to sell as many as 1,000 of them as condo-hotel units.

"Visitation to Las Vegas and gaming demand in general continues to drop and is not likely to rebound to any significant degree in 2010," Moody's said. "As a result of these adverse market conditions, peak construction debt will be materially higher than originally projected and earnings are likely to be substantially below initial expectations. Thus, the company's ability to meet its debt service burden once the project opens is in jeopardy."

The ratings agency downgraded Fontainebleau’s corporate family and probability of default rating from Caa1 to Caa3, with a negative outlook. Moody’s last rated Fontainebleau in November when the same rating was downgraded to Caa1. Second mortgage notes were downgraded from Ca to Caa3.

About $2.4 billion of rated debt is affected, Moody’s said.

The S&P, which rates the bonds of major gaming operators, slashed earnings projections and credit ratings for Fontainebleau last month.

The rating agency lowered its corporate credit rating on Fontainebleau Las Vegas Holdings LLC to "CCC" from "B-", cut the rating on the resort's $1.85 billion in senior secured notes to "CCC" from "B" and lowered the rating on $675 million second mortgage notes to "CC" from "CCC.”

Discussion: 6 comments so far…

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By nightmare

March 4, 2009

4:20 p.m.

Suggest removal

Just what LV needs right now: 4,000 more rooms on the Strip. Maybe they should convert FB and CityCenter into prisons until demand picks up.

Or maybe everyone in Las Vegas that shows proof that they are current on their mortgage payments can stay at a new resort for free for up to one month. At least it might get someone in the room.
By denro

March 4, 2009

10:48 p.m.

Suggest removal

This one scares me. Looks like a failure in the making, though there are deep pockets behind it, how much will they spend to keep supporting it after it opens?
By denro

March 4, 2009

10:58 p.m.

Suggest removal

The Sahara is a dump, and there isn't going to be any development north of Encore for quite a while. Echelon being stopped has this project out on it's own geographically...with Wynn nightly rates close to a hundred dollars, the impact could be huge. Oh, what a mess.
By bdover

March 6, 2009

6:40 a.m.

Suggest removal

Riviera-Toast
Fontainebleau-Done
Harrah's-Cee ya
MGM Mirage-Maybe, but that's what you get with a cheater in charge. Right, Terry?
Venetian-Maybe, but at least they have such a likable owner...Hah..
Wynn-Probably, if he gets his head out of the French Riviera. Right, Elaine?
Stations-Finished-Somehow the Name "Fertitta" fits-Must be an Italian word meaning failure. "Wow, I pulled another Fertitta".
By appeal2

March 8, 2009

3:43 p.m.

Suggest removal

Guess if you build it they won't necessarily come.