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Friday, Nov. 27, 2009 | 2:10 a.m.
Sun Archives
- Contractors make another bid for Fontainebleau (11-26-2009)
- Penn National’s bid sets up auction for Fontainebleau (11-5-2009)
- Fontainebleau subcontractors organize to finish project (11-17-2009)
- Fontainebleau developer plans appeal of rulings (11-2-2009)
- Subcontractors fall short in effort to move Fontainebleau case (10-26-2009)
- Executive named examiner in Fontainebleau bankruptcy case (10-16-2009)
- Fontainebleau president among execs leaving project (10-15-2009)
- Fontainebleau a symbol of bad timing, not the only victim (10-12-2009)
- Fontainebleau judge wants quick sale of bankrupt project (10-2-2009)
- In reversal, Fontainebleau lenders suggest liquidation (9-25-2009)
- Fontainebleau: Bank no longer ‘seeking to destroy’ project (9-17-2009)
The retail portion of the idled Fontainebleau Las Vegas casino resort filed for bankruptcy protection Wednesday -- introducing a new set of creditors and controversies to the massive case.
Fontainebleau attorneys said the three retail subsidiaries filed for Chapter 11 reorganization as part of the sales proposal and debtor in possession financing arranged with investor Carl Icahn.
As Fontainebleau's stalking horse bidder, Icahn has offered $156.2 million in cash and financing for the unfinished project -- including its retail component.
The attorneys asked the U.S. Bankruptcy Court in Miami on Wednesday to combine the retail cases with the three existing casino-resort bankruptcy cases, which were filed there June 9 after banks halted funding to the resort and construction stopped.
The subsidiaries seeking bankruptcy protection Wednesday were Fontainebleau Las Vegas Retail LLC, Fontainebleau Las Vegas Retail Parent LLC and Fontainebleau Las Vegas Retail Mezzanine LLC.
The Fontainebleau Las Vegas Retail filing listed among its unsecured creditors bankrupt Lehman Brothers Holdings Inc., owed $105.5 million, a claim Fontainebleau listed as "disputed."
Other big lenders listed as creditors are Union Labor Life Insurance Co., owed $39.3 million; PNC Financial Services Group, owed $11.2 million; and Sumitomo Mitsui Financial Group, owed $11.2 million.
The Fontainebleau Las Vegas Retail Mezzanine filing listed another $123 million owed to Lehman Brothers, again unsecured and again disputed.
The Fontainebleau Las Vegas Retail Parent filing listed no unsecured creditors.
The retail portion of the resort has been described as totaling 287,000 square feet and planned with high-end shops, restaurants and a nightclub.
The new cases mean additional disputes may be litigated in the bankruptcy court over liens filed against the retail portion of the project.
Contractors in the main casino resort bankruptcy have already filed claims totaling $467 million, which is in addition to some $1.675 billion owed by Fontainebleau to banks and bondholders.
Even before the Fontainebleau retail entities filed for bankruptcy protection, a group of contractors filed suit against Fontainebleau Las Vegas Retail, Lehman Brothers, Bank of America and Wells Fargo Bank in Clark County District Court in Las Vegas.
That lawsuit, filed Nov. 20, asserted the contractors are owed tens of millions of dollars and that their liens are superior to those of the lenders.
The lawsuit, filed by attorneys with the Las Vegas law firm of Pezzillo Robinson, alleges that work commenced on Fontainebleau in or about November 2006, but that the lenders did not record deeds of trust, liens or other encumbrances until June 2007.
"Therefore, plaintiffs' liens against the project are superior to that of the lenders pursuant to" Nevada law, the suit charges.
Plaintiffs in the suit are:
--Zetian Systems Inc. and its sister company Z-Glass Inc., claiming to be owed $7.39 million and $9.6 million, respectively.
--Graybar Electric Co., owed $207,000.
--Tracy & Ryder Landscape Inc., owed $1.591 million.
--Water FX LLC, with liens of $13.2 million and $463,000.
--Quality Fixture and Cabinet Co., owed $4.2 million.
--Derr and Gruenewald Construction Co., with liens of $4.8 million, $39,000 and $259,000.
--Sierra Glass & Mirror Co., owed $358,000.
--Morris Shea Bridge Co., owed $370,000.
--Crescent Electric Supply Co., with liens of $53,000 and $48,000.
--Integrated Mechanical Group LLC, owed $145,000.
--Hilti Inc., owed $24,000.
--Cashman Equipment Co., owed $84,000.
Lehman Brothers, Fontainebleau developer Jeff Soffer and his sister, Jacquelyn Soffer, in the meantime, are engaged in separate litigation involving another Las Vegas project.
The Soffers and three of their companies sued Lehman Brothers on Feb. 27, charging Lehman had reneged on part of a commitment to provide $1.5 billion in financing for three projects developed by the Soffers' Aventura, Fla.-based Turnberry Associates development company, where the siblings are executives.
The projects were the Fontainebleau retail project, the 93-acre Town Square shopping center in Las Vegas and the Aventura Mall in Florida.
While the Fontainebleau and Aventura financings closed, Lehman Brothers failed to provide promised long-term financing for Town Square in Las Vegas, the lawsuit charged.
The Turnberry companies said the initial $520 million in Town Square construction financing was provided principally by Deutsche Bank. Development of Town Square started in 2004 and Turnberry later sought customary long-term take-out financing as well as an additional $100 million for the project, the lawsuit said.
The Soffers asserted in their suit that at the insistence of Lehman, they personally were the borrowers in July 2007 under a $95 million "interim advance" credit facility for Town Square, with the expectation that Lehman would later include the interim advance in permanent financing.
"Lehman has now made clear that it is refusing to honor its commitment to provide the permanent financing," charged the lawsuit, filed several months after Lehman filed for bankruptcy on Sept. 15, 2008.
But Lehman Brothers, in responding to the lawsuit, denied it made representations it would provide long-term financing for Town Square and filed a counterclaim accusing the Soffers of breach of contract for failing to pay amounts due under the loan -- $72 million -- when it matured Feb. 27.
The counterclaim also alleges Turnberry Retail Holding LP, one of the Soffer companies behind Town Square, had guaranteed the loan but also has failed to pay the balance due.
That lawsuit is pending in Lehman's New York bankruptcy court.
At this rate the place won't be open til .... dare I say 2011 or 12 ? What a mess.....
construction started before nov '06,i remember driving by there in the spring and summer of '06 and they were already working at that site
maybe these chumps can get doobie I mean dubai to bail them out???
Can one stretch his/her imagination to try to comprehend the Cecil B DeMille cinemascope and technicolor dreams the Soffer's must have enjoyed every night PRIOR to their fall. Did anyone ever ask themselves: Are we going a bridge, or two, too far? The hubris of pure self-belief is all over this architectural monstrosity. Fact is, the Soffer's were not the only members of the LV Dreamer's Club....obviously!
if you've been watching the news today...i wouldn't count on dubai bailing anyone out anymore. now THEY'RE out of money.
the "new normal" for most americans does not include $3,000 3 day weekends in vegas.
its the most ugly building ive ever seen. more like an office building than a casino.
So let's get this right. Icahn wants to bid 152 million to get a building that has already cost 1.9 Billion. Not a bad deal. 8 cents or so on the dollar!
But that's not all.
He gets to stiff the subcontractors outstanding claims. $467 million. He also laughs at the lenders, who are owed 1.675 Billion. Gee, again it totals about 2 Billion.
Carl Icahn is a corporate raider and a hatchet man, most famous for forcing corporations to bleed the equity out of their businesses, and give it to the shareholders. But in this case, old Carl sees a disaster that is ripe for the picking. Good-for once I wish him the best.
Ichan didn't create this mess, he is just willing to pick up the pieces.
That's a lot of money. It must be one heck of a retail component.
Ichan picked up the Stratosphere for pennies on the dollar as well. He put money into it (building the new wing of the hotel and almost doubling it's size) and then sold it (along with the two AZ Charlies, the Aquarius and a bunch of vacant land) at just the right time in 2007. The new owners have been losing money ever since!
Maybe this is a signal that LV is at, or near, the bottom. Ichan is a bright guy and has lots of bright guys working for him.
Oh, what a tangled web they weave.
One of Fontainbleau's problems was they had different construction lenders on the hotel/casino parcel than on the retail commercial parcel.
One of the construction lenders on the retail commercial part of their project was a Lehman Brothers entity which went bankrupt. Once Lehman Brothers went bankrupt, Fontainebleau received only part construction loan funding for the retail commercial property, from the not-bankrupt lenders. Fontainebleau's owners claimed they used their own money to make up for missing Lehman Brothers money.
When Fontainebleau casino went bankrupt, the retail commercial building owner was not put into bankruptcy, because of the aggravation involved in dealing with a bankrupt mortgage lender.
The judge in the Lehman Brothers bankruptcy case in NY, James Peck, is very aggressive about refusing to let other bankruptcy courts e.g. the Central District of California) destroy that bankrupt mortgage lender's liens, under Bankruptcy Code 363, which is exactly what the sale approved by Judge Cristol in the Fontainebleau case has said will occur with respect to the sale of Fontainebleau.
The way the contract for the sale is structured, if the buyer (Icahn) and the seller (the Soffers) cannot get Lehman Brothers to release their mortgage on the retail commercial part of Fontainbleau for pennies on the dollar, the buyer (Icahn) will simply buy the hotel and casino but not the separate retail commercial building.
Recently, Lehman Brothers' Chief Restructuring Officer, Bryan Marsal, who is like a Chapter 11 Trustee, got Judge Peck to agree that Lehman Brothers as debtors still operating their bankrupt mortgage company can "negotiate and agree to deals" on Lehman Brothers' troubled real estate loan portfolio without Judge Peck having to approve the deal, if the deal is small enough. Small is a relative term.
The free view docket in the Lehman Brothers bankruptcy will allow pundits to figure out if Judge Peck's approval is needed for the stripping of Lehman's mortgage lien off the Fontainebleau retail commercial property, as part of a sale to Icahn. See:
http://chapter11.epiqsystems.com/docket/...
Look at Docket # 5653 in that free view website to see the extent Lehman Brothers can negotiate with Icahn and the Soffers, and make a deal, without Judge Peck and Lehman's thousands of creditors sticking their nose in the mix.
I am not going to waste time figuring this out. My bet: The Fontainebleau sale closes without the retail commercial building, and the buyer just lets the mortgage lenders on the retail commercial building twist in the wind, in the Miami bankruptcy court cases described in the Sun story above, until those mortgage lenders on the Fontainebleau retail commercial property "get real".
This is a real mess.