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Friday, Oct. 2, 2009 | 8:42 a.m.
Sun Archives
- In reversal, Fontainebleau lenders suggest liquidation (9-25-2009)
- Fontainebleau: Bank no longer ‘seeking to destroy’ project (9-17-2009)
- Potential buyer in negotiations for stalled Fontainebleau project (9-15-2009)
- Fontainebleau contractors seek lien claims in state court (9-14-2009)
- Fontainebleau suit against lenders moved from bankruptcy court (8-5-2009)
- Another lawsuit alleges unpaid work at Fontainebleau (7-14-2009)
- Fontainebleau builder says it’s protected from paying severance (7-14-2009)
- Fontainebleau fires back, outlines bank dispute (7-8-2009)
- Fontainebleau developers: Design change could help costs (7-6-2009)
- Court filings shed light on Fontainebleau financing (7-2-2009)
- Practice of building before designs are done hits wall at Fontainebleau (6-28-2009)
- Flood of new hotel rooms dims Vegas outlook for '10 (6-23-2009)
- More subcontractors accuse Fontainebleau of failing to pay for work (6-23-2009)
- Fontainebleau subcontractors want bankruptcy case moved (6-22-09)
- State gaming regulators shied away from policing borrowing (6-21-2009)
- Fontainebleau subcontractors say contractor conflicted (6-19-09)
The Fontainebleau Las Vegas bankruptcy judge is pushing for a quick sale of the stalled, partially-completed $2.9 billion casino resort on the Las Vegas Strip.
Citing the lack of progress in reorganizing Fontainebleau's debt and a motion by key lenders that the project be liquidated, U.S. Bankruptcy Judge A. Jay Cristol in Miami ordered Fontainebleau attorneys on Thursday to appear at a hearing next Wednesday to show cause why an examiner should not be appointed.
Cristol proposed the appointment of an examiner without being requested to do so and on his own initiative.
He said this makes more sense than to convert the case from a Chapter 11 reorganization to a Chapter 7 liquidation and appoint a trustee to supervise a sale, as proposed by the lenders. A hearing on the Chapter 7 conversion is set for Oct. 28.
"The court believes it is more expeditious to proceed with any potential sale as soon as possible rather than to wait until Oct. 28, when a trustee, if appointed, would be required to expend a significant amount of time to obtain counsel, familiarize himself or herself with this case and effectuate a sale," Cristol said in his order. "It also appears more economical to immediately appoint an examiner than to appoint a trustee whose fees and expenses would likely far exceed the costs and expenses of an examiner. The court therefore believes it is in the best interest of the estate and all parties to appoint an examiner at this time to examine, negotiate and supervise a sale of debtors’ assets."
The judge also wrote:
"The record in this case indicates that the parties to these proceedings are not cooperating with one another. A motion to convert has been filed by the Term Lender Steering Group seeking to convert this case to one under Chapter 7 of the (bankruptcy) code. The motion is premised upon the lack of meaningful progress made thus far in this case, despite the fact that more than $16 million of the Term Lender Steering Group’s cash collateral has been used during the administration of this case.
"The Term Lender Steering Group submits that completion of the Las Vegas project is not possible and a sale of the project to a third party and liquidation of the remaining assets is the only viable course to realize any meaningful value for the creditors.
"The debtors have indicated they have made efforts to arrange a sale of the Las Vegas project, but the Term Lenders appear to be concerned about a possible conflict of interest and accordingly filed the motion to convert."
The steering group lenders hold some 27 percent of the project's $1 billion in term loans, court records show.
On Sept. 25, they filed the motion to convert the case to a Chapter 7 liquidation.
They said sales efforts have been complicated by Fontainebleau developer Jeff Soffer's conflicts of interest.
Soffer, for instance, is essentially both a debtor and a creditor as his Turnberry West construction company has filed a $675 million claim against the project. Soffer is a Miami businessman known in Las Vegas for developing luxury Turnberry condominiums and the Town Square shopping center.
Creditors have also argued Fontainebleau's developers no longer have any equity in the project given its debt, costs to complete it and the weak gaming market.
"Given that the debtors' shareholders lack any economic stake in the debtors, efforts by Mr. Soffer to formulate a transaction under which he will receive some consideration or benefit will, unless he is forced to negotiate at arms-length with an independent trustee, divert value that belongs to the estate from creditors," the lenders said in their motion last week.
Penn National Gaming and other parties have been looking at buying the Fontainebleau casino-resort project, but have found it to be a difficult deal because creditors want to be satisfied and because costs to complete it may top $2 billion at a time when the Las Vegas gaming market is already saturated with hotel rooms and slot machines -- a situation that will worsen when the CityCenter project begins to open in December.
Fontainebleau, which filed for bankruptcy protection in June, had been banking on success in a lawsuit accusing Bank of America and other revolving loan lenders of wrongfully terminating the project's funding. But Fontainebleau this summer lost a key summary judgment ruling in the lawsuit, in which the banks said they were justified in canceling $656 million in funding for the project early this year because of cost overruns and other problems. A federal judge in that ruling sided with the banks in their interpretation of the credit contract at issue.
It was the revolving lenders' decision this spring to halt funding for the project that caused construction to stop, with 70 percent of the resort completed, sending it into bankruptcy.
Fontainebleau has not yet responded to last week's motion that the case be converted to a Chapter 7 liquidation or to the judge's order of Thursday proposing that an examiner sell the project.
"The Term Lender Steering Group submits that completion of the Las Vegas project is not possible"Creditors have also argued Fontainebleau's developers no longer have any equity in the project given its debt, costs to complete it and the weak gaming market"Turnberry West construction company has filed a $675 million claim against the project" Penn National Gaming and other parties have been looking at buying the Fontainebleau casino-resort project, but have found it to be a difficult deal because creditors want to be satisfied and because costs to complete it may top $2 billion at a time when the Las Vegas gaming market is already saturated with hotel rooms and slot machines -- a situation that will worsen when the CityCenter project begins to open in December" Fontainebleau this summer lost a key summary judgment ruling in the lawsuit, in which the banks said they were justified in canceling $656 million in funding for the project early this year because of cost overruns and other problems. A federal judge in that ruling sided with the banks in their interpretation of the credit contract at issue."
Summarizes why this project won't be completed -- anytime soon, if ever.
: (
Harley---"Summarizes why this project won't be completed -- anytime soon, if ever."
if ever??? Pleeeezeeee...
You can double down on that Echelon project not reaching complete as well.
"That's just the way it is"" - Bruce Hornsby
: )
I suppose in time, contractor's will have to get the equivalent of a "completion bond" from the owners. How else will they ever get a mega project built. What contractor can stand to lose that kind of money?
Call it a "payment in full" bond.
I wonder how many contracting businesses were ruined by this project.
So what if they have a lien? Liens are worth next to nothing until they are satisfied. Liens don't pay subcontractors...
The tragedy is not the Fountainbleau, its what the Fountainbleau represents thats the tragedy.
This is going to be a rotting hulk for a long, LONG time.
The problem is that this thing has $2 billion in debt and it will take $2 billion to complete and at completion it will be worth about $2 billion. That means that anyone interested in it will not be able to offer much more than a token payment unless they want to lose money. With that in mind, this will never be sold if the creditors won't let go, or they will receive a payment so low they will be lucky to see ten cents on the dollar if it goes to a true auction. There is just no economic reason to offer more than couple hundred million on this.
Great entertainment for us observers, though. This whole project was a huge charlie fox.
good judge, I'm glad they move these project along. I think it should be sold to Osama Bin Ladin, who has more experience in the construction industry than the clown college running the project. This project is also haunted by the ghosts of dead construction workers and should be turned into a halloween hhouse for the short term.
Say you had $300 million to buy outright. Why in the world would you
want this pig? It's not WYNN and its not downtown. What is it? A generic
corporate building, with lots of penny slots and $9 beer.
The hot new VEGAS trend: Boring Blue building, penny slots: WOW!!
I want to go there!!!!! I hope the room rates are $259- night such a deal!!!
Schedule the Implosion.
You will not see a new casino built for 25 years. We can also implode some downtown casinos and Rivera and Imperial Palace to name a few.
Implosion could wind up happening. Anyone notice more and more missing blue glass panes from the facade? The glass is starting to fall away!! No one, in the current market environment, would pay more than a token sum for it, as it still needs lots of money to complete. As it continues to deteriorate, the monies needed will only increase. Would the County, citing safety concerns, force it to be blown up?
I am a contractor in Miami. My invoice was sent to Vegas to be paid. Why? And by the way, no it has not been paid. Just like all the rest.
As a former contract manager for commercial construction projects, it's sad to see the coming failure of the lien claims by the subcontractors. As I used to say, a "lien waiver" is as useless as a drunken bum trying to hold himself up while checking out the chicks. A "Lean Waver". Funny that the subs didn't learn from the Sheldon Adelson School of screwing subcontractors. Too late now...
I remember the days when there was the Stardust and it was great walking through this casino and remembering the good old days. The Stardust Sports Book was one-of-a-kind and the poker room was filled with old-timers, some of them telling me stories about Vegas-how it used to be. Great times, but no longer.
The Echelon construction site looks like a war zone in comparison. Unlikely that it will ever get finished. The FountainBleu was a gamble that the Echelon Place would be finished and then the entire zone on the Strip would perhaps get a revivial. Without Echelon, even the FountainBleu is worthless. Nobody will go gambling there. The Riviera and Sahara are alive, still, and absorbing the very few low-roller tourists. There's no need for the Fountain Bleu. I would put the half-way finished resort on hold for years, put a big fence around, and perhaps resume construction in 5 to 10 years when there are indicators that the situation might improve. Until this happens: Declare bancruptcy and let Deutsche Bank (USA) keep the ownership on the entire project. Over the years, by writing-off annualy, amortisations or whatever, the place could get a fair face value of perhaps 500 Mio usd or so, in which case, completion would make sense and the new owner perhaps has a chance to get this thing under way.
From Switzerland
It was a mistake to implode the Stardust, The property was at least making money and was a part of Old Vegas, I guess the old timers had it right the first time, Vegas was built on the small individually owned and operated casinos. I think Steve Wynn should buy the property and do work some of his old school charm.
Boyd gaming should finance the completion...rename it the Stardust, sell the property accross the street (the barely started and stalled Echelon) and call it a day.
Boyd could use a strip presence, and the Stardust has a brand name that could be marketed to middle market vacationers, something very lacking on the strip.
howdydostu, I like Your Idea !!!! This could be a little something. Boyd showed interest in some of the also troubled Station Casinos properties (Texas Station, Santa Fe, Fiesta Rancho, (and the Aliante?). But they were turned down by Station that obviously wants to hold tight on these operations. It means, Boyd gaming has some breathing air (money on hand). The Fountain Bleu to be renamed as The New Stardust could be something. Then, implode all construction right across the street where they tried to build the Echelon (titanic II, after CityCenter is titanic I), and build a nice amusement park or whatever on that site.
This could be the solution of many problems and make the mid Vegas Strip look a bit more attractive. Also, it could help Circus Circus survive. Not too many tourists like to walk down there as there's too much sand being blown over from the Echelon site.
Your idea might be a very good idea, indeed !!! I suggest you bring this idea and business plan directly to Boyd Gaming. This could be something and create new jobs again :)
From Switzerland
I will write to Boyd Gaming personally. howdydostu. This could be a solution , indeed. The world cries for the Stardust and I think, even Boyd would not have pulled down the Stardust if they could change their mind today. For a 2 billion dollar investment they could get a property that's worth about that and has potential for a big future at almost the same site than where the good old Stardust used to be. Why not. Could be worth a trial. I'll email them right today :))))
From Switzerland
What a beautiful relic for a bygone era.
The idea is not bad at all, but could it be that Boyd has thought about long time ago. Knowing, however, that the new owner will go bankrupt anyway and the hotel can only be profitable if you can get the entire thing for less than 800 Million dollars, they will probably wait another 5 years before the New Stardust will be born.....
The Stardust shall rise again!!!!!!
Vegasvampire. I sent an email to boydgaming last night after thinking through again. However, I didn't get a response back from any of these guys yet. Unlikely to hear anything, anyways, but if I hear something, I'll let you guys know. The idea in fact is very good and Fountainbleu is bankrupt and has no options to finish its initial project. Boyd Gaming has some money available and could turnd this place into the "New Stardust" easily. Plus , there's still the Echelon site right next to it with lots of opportunities....
I'll keep you posted on that :)
From Switzerland
Someone buy it and complete it. I still think that Weinberg should get it but without filling the inside with kitsch. He doesn't have much more place to expand, unless he gets rid of his gold club.
BorisR,
The idea of Boyd gaming buying and completing the Fountainbleau Project is a great idea.I also agree with you that a amusement park would be Ideal for the Las Vegas Strip and would generate a new brand of tourism in Las Vegas.The Echelon location is near enough to Freemont Street and the World Market it could boost there business and make travel and tourism more attractive.My only thought that would prevent Boyd Gamming from turning the Echelon property into something other than a casino resort is that 80% if not 100% of steal to build Echelon has been already pre-fabed for the project.Also they can stall the project under clauses of the project but I am sure their contracts are binding and would have to be honored to a certain percent if they completely abandon Echelon which could cause great loss to the Boyd Gamming Co.
Not being sure of their exsisting contracts of course the Echelon Project will eventually move foward.What bothers me is that these guys did not see the the economic crisis comming.This economic ressesion was evident and was seen comming at the middle to the end of 2005.
FountainBleau was a sinking ship from day one and I dont see their logic behind their decission in going foward.Now if boyd was to invest into Fountain Bleau it might be a smart investment Maybe finishing the project but only completing 50% of the rooms until the economy returns would be an idea.They could also proceed with Echelon and scale it back then connect the 2 resorts and at the sametime lease some of the Echelon land to an Amusement Park developer who has deep pockets and build a family oriented resort on the north end of the strip.Of course we are common people who live here in Vegas and dont have a clue what would be best for Vegas but we are the same common people who live here and have to deal with these super corperate execs smart decissions.They have virtually bankrupted themselves and this town.
Fountainblows!!
rodtig
I don't think that the already installed concrete and iron bars on the Echelon site would be a big problem if Boyd decides to cancel and amend its project. They blow down big hotels just like The Stardust, so why should it be a problem to flatten out the basic construction site?
I think that the hotels interested to operate on the Echelon site have no further obligations, but I am of course not involved.
Wouldn't be a great thing to turn the Echelon into a big amusement park for the fun seekers and have the action going on in the casinos adjacent?
I will forward your comment and mine to a contact person at Boyd. Although I think they don't let their plans interfere with our ideas and phantasies, but you never know...:)
Best wishes from Switzerland
All of this commentary regarding the Stardust brings back memories that are some of my fondest throughout my compulsive gambling career! I loved that place like a dog loves his bone! tearing down it was the worst move Boyd Gaming ever made! That place had the friendliest staff, cocktail waitresses who actually remembered you and what you drink..Lisa I still love you wherever you reside these days! The fountainbleau should be bought by Boyd, completed, and re-opened as the Stardust Hotel. No fancy fanfare needed, just finish the tower, build the casino and we old "dusters" will all have a reunion and gamble ourselves silly, and top it off with a great Steak and lobstertail special in Tucan Harry's coffee shop, or perhaps the surf and turf special in the new William B's. Can't forget of course the plastic neon cup drinks by the pool, with the greatest hits from the seventies piped all over the place. Jeez.. don't get me started here...
The thing is: Boyd is a corporation, just like many others. they're carefully evaluating before investing 2 or more billions into a new project. Who wants to blame them?
Nevertheless, the Fountainbleau building, I mean, the main hotel tower, seems to be almost finished. So what Boyd would have to do is just some "fine tuning" , such as putting up the name of the baby ***The New Stardust***, and work out on a good casino floor, and all the other amenities. I think it would be more realistic to finish this than working out the Echelon project. However, let's assume this crisis will come to an end some day, the city starts hiring and economy pulls up, then there would still be the chance to complete the Echelon later or combine it somewhat with the "The New Stardust" later. If they need somebody to help organizing , please call me :)