Contractors make another bid for Fontainebleau

By Steve Green

Thursday, Nov. 26, 2009 | 2:05 a.m.

Contractors owed hundreds of millions of dollars for work on the Las Vegas Fontainebleau casino-resort moved again Wednesday for the right to take over the project by making a bid for what they're owed, known as a credit bid.

Their attorneys filed a motion for credit bidding in Miami's bankruptcy court the same day that Judge A. Jay Cristol signed paperwork approving investor Carl Icahn as Fontainebleau's stalking horse bidder.

Court records Wednesday showed Icahn bid $105 million in cash and agreed to provide $51.2 million in financing for a total bid of $156.2 million -- up slightly from the $156 million discussed during a Monday hearing in which his company, Icahn Nevada Gaming Acquisition LLC, outbid Penn National Gaming to be the stalking horse.

The stalking horse bid is now the amount that must be topped should other bidders pursue the project. Cristol set a Jan. 15 deadline for bids for the project and for objections to the proposed sale; and a Jan. 27 hearing to consider approval of the sale to the high bidder.

During Monday's hearing, an effort by construction giant Tutor Perini Corp. -- builder of CityCenter and other hotel-casino projects -- to provide financing for Fontainebleau was rejected because at that time Cristol declined to confirm the extent of the contractor liens.

A Tutor Perini subsidiary is one of the Fontainebleau contractors.

"The debtor-in-possession financing offered to the debtors by Tutor Perini Corp. on the morning of the interim hearing was not on terms more favorable than those contained in the (Icahn loan) documents because, among other reasons, the former included a condition precedent that the court enter an order determining that the liens of the statutory lienholders are in a first priority position and that the statutory lienholders are holders of a credit bid of not less than $225 million that is a qualifying bid under the bid procedures adopted by the court in connection with the sale,'' Cristol's order approving the Icahn loan said Friday.

A hearing was set for Wednesday, Dec. 2, on the latest motion by the subcontractors, who claim to be owed $467.6 million and assert Fontainebleau's own records confirm their liens total at least $273 million. They're again asking Cristol to confirm the extent of their liens.

"A purchase of assets via a credit bid is the equivalent of a cash purchase," the contractors' attorneys argued in court papers.

They noted Jeff Truitt, the examiner in the Fontainebleau case, testified Monday that he preferred a "reasonable and practical credit bidding mechanism'' be part of the sale process, that "credit bidding would foster rather than hinder the sale process'' and that Icahn was not opposed to such a process.

The contractors have asserted their liens have priority over lenders' liens and several of the contractors have been working to find partners or financing to buy and complete the resort.

Besides the losses faced by contractors, lenders and bondholders owed $1.675 billion face huge losses on the project. In addition, it's estimated that whoever buys the 3,800-room Fontainebleau will have to spend $1 billion to $1.5 billion to complete the resort.

With work said to be 70 percent complete, work was halted on Fontainebleau this summer after banks led by Bank of America cut off funding due to cost overruns and other problems. Fontainebleau has so far been unsuccessful in its lawsuit against the banks over their decision to stop lending for the resort.