Tuesday, Sept. 15, 2009 | 9:16 a.m.
- 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)
At least one unidentified potential buyer is negotiating to take over the bankrupt Fontainebleau hotel-casino development in Las Vegas, Fontainebleau reported Monday.
But significant hurdles remain for the resort to be sold and its construction completed, including difficulties a buyer may have in obtaining financing.
Stung by substantial losses on Las Vegas casino and real estate deals, banks and investors have been wary about investing in Las Vegas during the recession -- especially with a growing over-supply of hotel rooms on and around the Las Vegas Strip.
In an emergency motion Monday seeking court approval to pay salaries and maintain the stalled, 70 percent-complete resort, Fontainebleau sought access to $3.73 million through Oct. 5 "to preserve and protect the project pending the negotiation of a transaction with a potential buyer."
Fontainebleau also indicated it's less likely it will succeed with efforts to force Bank of America and other big banks to continue financing the $2.9 billion resort on Las Vegas Boulevard.
Fontainebleau noted a federal judge on Aug. 25 denied Fontainebleau's motion for summary judgment in its lawsuit against Bank of America and other revolving-loan banks that this spring canceled $656 million in funding needed for construction. The failed summary judgment motion would have forced the banks to provide the funding.
The banks have said Fontainebleau had defaulted on the loan agreement because of cost overruns and other problems. The loss of funding led to the resort's bankruptcy and the decision to halt construction on the project.
Before the Aug. 25 ruling, the court had ordered the banks and Fontainebleau to mediate their dispute, but the mediation appears to be going nowhere.
"It seems less likely that the mediation process will result in a global resolution," Fontainebleau said in its court filing. "Thus, the debtors have been intensely focused on forging a transaction to facilitate completion of the project independent of resolution of the revolver (bank) litigation," Fontainebleau said. "These discussions are encouraging. Indeed, just this afternoon, the debtors received preliminary draft term sheets for debtor-in-possession financing and for a sale transaction."
Fontainebleau, however, cautioned the sale of the project would be a complex transaction complicated by its inability to include the resort's separately-financed retail component in the bankruptcy and "the difficulty that any purchaser will face in the current credit environment obtaining financing to complete the project."
Besides these factors, any sale would be subjected to scrutiny by bank and investment company lenders, bondholders and contractors -- groups each owed hundreds of millions of dollars.
These creditors would have the opportunity to object and offer their own reorganization plans for the project, with the bankruptcy court having the final say.
While the potential buyer for Fontainebleau has not been identified, the companies most mentioned as being interested in the deal are Penn National Gaming, which has been looking for an opportunity to expand to Las Vegas; and deep-pocketed Apollo Management L.P. -- one of the companies that controls Harrah's Entertainment Inc.