News for the Hospitality Executive
Fontainebleau in Las Vegas Files for Bankruptcy
$2.9 billion Resort Project Shut Down, Victim of Cost
Depressed Condominium Market, Skittish Lenders
MIAMI - June 9, 2009 --Fontainebleau Las Vegas LLC and two of its affiliates (Fontainebleau Las Vegas Holdings LLC, Fontainebleau Las Vegas Capital Corp.) today announced that they filed voluntary petitions to reorganize under Chapter 11 of the United States Bankruptcy Code. The decision to file for Chapter 11 was the direct result of certain lenders having refused to honor their contractual commitments to provide nearly $800 million in construction funding for the $2.9 billion resort-casino project, which is 70 percent complete.
“It is unfortunate that our lenders forced us to take this step. By reneging on the revolving credit facility, they effectively shut down the project and put thousands of people out of work,” said Howard Karawan, Chief Restructuring Officer of Fontainebleau Las Vegas. “Our goal now is to secure funding to complete this world-class project and restructure our existing debt.”
Fontainebleau Las Vegas has reached a provisional agreement with a group of its non-defaulting lenders for the use of cash for the administration of its bankruptcy case, and is simultaneously in negotiations to obtain financing to recommence construction at the project.
Fontainebleau Miami Beach, which is a separate legal entity, is not included in or affected by the filing and continues to operate as normal. Turnberry West Construction Inc., the project’s general contractor, also is not included in the filing.
Fontainebleau Las Vegas also announced that it withdrew without prejudice its $3 billion lawsuit in Las Vegas against certain of its lenders and refiled the case in the U.S. Bankruptcy Court in the Southern District of Florida, Miami Division, where the Chapter 11 petitions were filed.
Fontainebleau Las Vegas originally filed the lawsuit on April 23, 2009 against Bank of America, JPMorgan Chase Bank, Deutsche Bank Trust Company Americas and certain other lenders after they reneged on their contractual commitments to provide the Company with almost $800 million in prearranged funding. The lawsuit was amended on May 12 to include allegations that Deutsche Bank Trust Company Americas was “seeking to destroy the Fontainebleau in order to minimize competition” with the nearby Cosmopolitan Resort and Casino, which is wholly owned by a Deutsche Bank subsidiary.
Since its lenders reneged on their commitments in April, Fontainebleau Las Vegas has repeatedly requested that those lenders meet their funding obligations. Withdrawal of the revolving credit facility forced the project to halt nearly all construction and resulted in the loss of more than 3,000 union construction jobs.
"Fontainebleau Las Vegas will continue to aggressively prosecute claims against these lenders for failing to honor their contractual commitments," said Scott Baena of Bilzin Sumberg, bankruptcy counsel to the company. "The damage caused by the bad faith of these lenders has not only caused financial hardship to Fontainebleau Las Vegas and its employees, but also to the company's creditors throughout the United States, when economic circumstances are such that they can least afford it." For court pleadings please visit www.kccllc.net/fblv.
Sitrick And Company
|Also See:||Owners of the Fairmont Turnberry Isle Resort & Club in Miami Suing Fairmont Hotels Claiming Mismanagement of the Property Following a $133 million Renovation / April 2009|
|The Vegas Fontainebleau Sues Bank of America, JPMorganChase for Reneging on Construction Loans to Finish the $3 billion 3,800 Casino/Hotel; Suit Claims the Banks Were Recipients of Bailout Money Making the Withheld Money More Egregious / April 2009|
|Nakheel Hotels Investing $375 million in Exchange for a 50% Interest in the Fontainebleau Miami Beach Resort / April 2008|
|Las Vegas New Resort Boom Fizzles / January 2009|