|By Howard Stutz, Las Vegas
Review-JournalMcClatchy-Tribune Regional News
Jan. 15, 2010--Penn National Gaming will not submit a bid for next week's planned bankruptcy court auction of the shuttered Fontaine- bleau project, a company spokesman said Thursday.
The regional casino operator made a lowball offer for the Strip development in November but was outbid a week later by billionaire corporate raider Carl Icahn.
The former owner of the Stratosphere and the Arizona Charlie's hotel-casinos has offered $156.6 million for the Fontainebleau to become the stalking horse bidder for the project, which once had a construction budget of almost $3 billion.
The U.S Bankruptcy Court in Miami has scheduled an auction for the Fontainebleau for Thursday and bids are due by today.
Penn National spokesman Joe Jaffoni said the company would not participate in the auction.
"That's all we have to say on the matter," Jaffoni said.
Macquarie Securities gaming analyst Joel Simkins said investors weren't happy with Penn's interest in Fontainebleau.
"We believe the company will continue to keep an open eye toward alternatives that might become available from other distressed sellers or those looking to shake loose noncore assets," Simkins said.
On Nov. 10, Penn National offered $50 million for Fontainebleau, in addition to agreeing to establish a revolving loan agreement of $51.5 million for expenses. On Nov. 23, Penn National reportedly increased its bid to $145 million after Icahn's attorneys announced an offer of $136 million. Icahn increased his offer by $20.5 million and Penn dropped out.
Icahn's offer was set as the opening bid in the auction.
Analysts have said it will take at least $1.5 billion to $2 billion to finish the 3,889-room Fontainebleau, which was about 70 percent complete when construction was stopped in April after lenders cut off $800 million in financing. The 63-story building is on 27 acres on the north end of the Strip.
Penn National, which applied for a Nevada gaming license in July, has been pursuing a gaming opportunity on the Strip since 2008. Company Chairman and Chief Executive Officer Peter Carlino said in November he toured the Fontainebleau five times in 2009.
Buying distressed casino assets in Las Vegas is nothing new to Icahn. He realized a $1 billion profit when he exited the Las Vegas casino market in early 2008, selling the Stratosphere, both Arizona Charlie's and the Aquarius in Laughlin to a private equity firm $1.3 billion.
Fontainebleau Las Vegas LLC and affiliates Fontainebleau Las Vegas Holdings LLC and Fontainebleau Las Vegas Capital Corp. sought court protection from creditors June 9, listing assets and debt of more than $1 billion each.
Contact reporter Howard Stutz at email@example.com or 702-477-3871.
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