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Published Thursday, Oct. 8, 2009 | 1:08 p.m.
Updated Thursday, Oct. 8, 2009 | 1:24 p.m.
Sun Archives
- 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)
- 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)
The Fontainebleau Las Vegas bankruptcy judge today said he's decided to appoint an examiner to supervise the sale of the property.
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 last week proposed the appointment of an examiner.
Cristol today said he wouldn't sign the order until next week and encouraged Fontainebleau to continue sales talks with Penn National Gaming. The delay in signing the order will give attorneys a few days to draft the order, spelling out the duties of the examiner.
Cristol, during a hearing in Miami, said an examiner supervising the case and the sale would cost less than conversion of the case to a Chapter 7 liquidation that would be supervised by a trustee.
Term lenders claiming to represent nearly 60 percent of the $1 billion term loan today pushed for the appointment of the examiner, citing the need for transparency in the sales process.
Fontainebleau argued against the motion and said resort developer Jeff Soffer has recused himself from deliberations on the future of the project -- a reaction to claims by lenders that Soffer is conflicted as both a debtor and creditor and as a personal guarantor of some Fontainebleau debt.
Cristol wasn't impressed with that.
"Nobody's going to believe he's not running the show," the judge said.
Fontainebleau said it continues to work with Penn National Gaming on a deal in which Penn National would be the stalking horse bidder with an undisclosed bid -- a bid they said would be substantially less than the previously reported $300 million.
A Fontainebleau attorney said other potential buyers continue to look at buying the 70-percent complete resort, where construction was halted early this summer after banks halted funding due to cost overruns and other problems.
A key battle shaping up in the case is whether construction-lien holders or lenders will recover funds from any sale, with the lenders also potentially making claims for their losses against title insurers, attorneys said today.
Fontainebleau attorney Scott Baena argued against the immediate appointment of an examiner, saying it will take awhile for the examiner to get up to speed on the case and that this could delay the sales process.
He revealed some new details on the potential deal with Penn National: The gaming company would provide some $16 million in debtor in possession financing that would allow Fontainebleau to repay the term lenders their costs to finance the bankruptcy case and provide some funds for stabilizing the project including needed work on the roof and replacement of some windows.
The potential deal includes a financial incentive for the buyer to complete the project for less than $1.5 billion as well as a 3 percent break-up fee of the undisclosed purchase price, he said.
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.
Stuart & Robert Wyman-Cahall
Las Vegas, NV 89142
Sell the place to Boyd! call it the Stardust, and lets get back to the business of good times in Vegas!
Boyd can't make it with their current casinos why do they need another one? They should not have been so greedy and torn down the Stardust. Any body purchasing a casino with this market deserves all the problems that this will create. Watch when City Center opens.
~Implode~
"Nobody's going to believe he's not running the show," the judge said.
Fontainbleau's owners filed their Chapter 11 in Miami because they thought they would be able to home-town all of the other parties, because their lawyer has a good reputation with the Miami bankruptcy judge.
Stupid, stupid. Business people should never listen to their bankruptcy lawyer tell them where to file, until they get a second opinion from a bankruptcy lawyer in another city. Bankruptcy lawyers always want their "new clients" to file in a city convenient to the lawyer, where the lawyer can be the one to earn the big Chapter 11 debtor's counsel fees.
The fascinating legal question in this case is whether the mechanics lien claimants really do have a lien priority senior to the first and second mortgage. If so, the Term Lenders are still going to have to duke it out with the mechanics lien claimants over the sale proceeds from any sale of the property through the efforts of an examiner.
Even more exotic is Turnberry's claim, as a Nevada general contractor, that under Nevada's mechanics lien laws they were legally disabled from waiving their lien claim priority, to make their liens junior to those of the mortgage lenders, because of the content of Nevada laws designed to protect subcontractors. I am rubbing my hands, wanting to see that issue litigated under Nevada law, simply because it really makes me mad when lawyers from New York, or elsewhere outside of our state, who have no idea what Nevada law provides in terms of protection for mechanics lien claimants, try to abolish Nevada law simply by making real estate loan contracts governed by New York law. I would love to see the New York lawyers get hosed, just once on this sort of issue.
Of course, if Jeff Soffer had been smart enough to file the Fontainebleau bankruptcy in Nevada, Turnberry might have had a fair shot at winning a trial on that issue. Instead, we'll probably see a Miami bankruptcy judge conducting a trial which is supposed to be governed by Nevada mechanics lien law, based upon a contract which says it is governed by New York law. Of course, the Miami bankruptcy trial judge will get the application of Nevada law all screwed up, then there will be an appeal in front of some cr@cker justices on the Federal Circuit court in which Florida is located, who will side with the banks because the justices are good old boys and BofA is a North Carolina bank. All the while, the Nevada subcontractors will have to spend two or three times more in attorneys fees than they would have had to spend if Soffer had filed the Fontainbleau bankruptcy in Nevada.
Memo to contractors, subcontractors and legislators: Next time the Legislature is in session, pass a law saying no notes, loan agreements, guarantees or the like are valid or enforceable if they are secured by a deed of trust or mortgage on property in Nevada, unless ALL of the loan documents are governed by Nevada law.
It's sad that our economy is in the toilet, because there will be many subs who will be glad to take over for the liening subcontractors who may end up getting squat in their claims. Sometimes you have to wonder if the Unions here care-they'll send out the same band of slow-motion loafers to finish the job, as long as they get their exorbitant wages and bennies. And the previous subcontractor will be screwed and probably OOB. All subs should be required to go to the Sheldon Adelson School of Non-Payments. Look it up-the Venetian is the reason our lien laws are better than Florida.
hmmm,interesting conversations, but they're off. this situation has a long way to go for resolution. the only sure thing is that the lienholders won't get one red penny. jeffrey soffer will lose his guarantees, PNG "may" go in as the Stalking Horse and obtain some benefit from it, but i don't believe they'll be the ultimate owners. stay tuned for more "As Fontainebleau Turns."
"Boyd can't make it with their current casinos" a terribly false statement. Boyd would make a great fit for the FB....and re-naming "The Stardust" would be a lot of fun, but their eyes are set on Station.
How about Jack Binion? I would love to see him get back into the game. This project would be a big way of doing it!
American_Gaming_Guru, I need to correct you in a way that I would definetely rename the FB as "The New Stardust", but not just "Stardust". And I would have digigitally masterd laser stardusts coming down from the sky above this huge building. Just to show the Luxor crew that there's a new star born in Vegas :)
Tony Cornero would roll over in his grave a thousand times.