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April 18, 2014

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Fontainebleau president among execs leaving project

Fontainebleau Resort

The Fontainebleau, construction stopped, is seen dark along the Strip. Launch slideshow »

As developers of the bankrupt Fontainebleau Las Vegas resort attempt to sell the unfinished project, the company continues to trim its staff and most recently revealed the departure of its top local executive.

Audrey Oswell, president and chief operating officer of Fontainebleau Las Vegas and a longtime gaming executive, is among seven executives who have seen their employment contracts terminated since May 15, Fontainebleau said in court papers Thursday.

Oswell left Oct. 2, according to Fontainebleau's motion to reject her employment contract along with the contracts of Joel Bloom, Andrew Finn, Arik Knowles, Peter Magdos, W. Bryan O'Shields and Alexander Terry.

"Due to (Fontainebleau's) financial situation, each of the employees ... was terminated ... and is no longer employed by (Fontainebleau). Each such employee had entered into an employment contract ... . In the business judgment of the debtors, the employment contracts do not provide a benefit to the debtors or their estates, and the employment contracts may therefore be rejected," Fontainebleau said in its motion.

Oswell couldn't immediately be reached for comment Thursday.

Before joining Fontainebleau last year, Oswell was chief operating officer of the Cosmopolitan Resort & Casino, which is still under construction on the Las Vegas Strip.

Previously, she was chief executive officer of Resorts Atlantic City and president and chief operating officer of Caesars Atlantic City.

Fontainebleau, which has been working to sell the 70-percent-finished resort to Penn National Gaming or another party, also filed a motion Thursday for approval to cancel contracts for numerous meetings and conventions scheduled at the resort for between May 2010 and October 2011. With the project in limbo, Fontainebleau said it's unlikely it can accommodate those meetings.

Also in the case this week:

--Two groups of subcontractors sued Fontainebleau, Bank of America and other project lenders, seeking a declaration that their liens are superior to those of the lenders.

The plaintiffs in the first suit are Desert Fire Protection, Bombard Mechanical, Bombard Electric, Warner Enterprises/Sun Valley Electric Supply, Absocold/Econ Appliance, Austin General Contracting, Powell Cabinet, Fixture Co., Safe Electronics, Samfet and Union Erectors.

The second suit was filed by subcontractors Zetian Systems and its subsidiary Z-Glass, Graybar Electric, Tracy & Ryder Landscape, Water FX, Quality Cabinet and Fixture, Derr & Gruenewald Construction, Sierra Glass & Mirror, Morris Shea Bridge Co., Crescent Electric Supply, Integrated Mechanical Group, Hilti Inc. and Cashman Equipment.

The suits are similar to one filed earlier by the project's general contractor, Turnberry West Construction, which like Fontainebleau is controlled by Miami developer Jeff Soffer. The subcontractors noted the Turnberry West suit over the liens has been put on hold -- making it necessary for them to file their lawsuits.

--Judge A. Jay Cristol signed an order spelling out the duties of an examiner who will be named to supervise the sale of the property.

Cristol said he decided to appoint an examiner after a group of lenders complained that the sales process could be tainted by Soffer's conflicts of interest as being both a debtor and a creditor; and because of personal guarantees he's made for various Fontainebleau loans.

"This court finds and concludes that appointment of an examiner to expedite the sale process and avoid any conflict, or appearance of conflict of interest, is in the best interests of the estate and its creditors," Cristol said in his order.

"The examiner shall be responsible for negotiating the terms of any agreements with potential purchasers of the assets, including any `stalking horse bidder.' The examiner shall have unrestricted access to participate in any negotiations conducted on behalf of the estate with potential purchasers of the assets," Cristol's order said.

Once billed as a $2.9 billion project, construction was halted on the resort on Las Vegas Boulevard this spring after B of A and other lenders halted funding due to cost overruns and other problems including a lack of condominium sales that would have covered substantial construction costs.

Fontainebleau has borrowed $1.675 billion against the project, and estimates to complete it have ranged from $1.5 billion to $2 billion.

Interest in buying Fontainebleau has been hindered by the recession facing the gaming industry and the oversupply of hotel rooms, gaming tables and slot machines in Las Vegas.

Besides what's owed to the lenders, contractors have asserted claims against the resort totaling hundreds of millions of dollars -- including a $675 million claim filed by Soffer's Turnberry West company.

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