Fontainebleau Project Stalled
Construction at the Fontainebleau Las Vegas casino-resort development was halted June 11 while company officials sort out financial snags through a lawsuit against lenders and Chapter 11 bankruptcy proceedings.
Fontainebleau Las Vegas officials reportedly filed a $3 billion lawsuit in April in Florida against JP Morgan Chase Bank, Bank of America, Deutsche Bank and eight other lenders. The banks are accused of withholding $800 million in revolving credit that would cover the rest of construction costs as well as salaries for about 3,000 workers.
The complaint also seeks additional damages from Deutsche Bank for allegedly interfering with contracts because of the bank’s ownership in a competing Las Vegas development.
“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 Fontainebleau chief restructuring officer Howard Karawan. “Our goal now is to secure funding to complete this world-class project and restructure our existing debt.”
The banks allegedly backed out of the agreement because of one or more “events of default” by Fontainebleau, but company officials claim they’ve held up their end of the agreement.
The bankruptcy filing does not include Fontainebleau’s Miami Beach property.
The Fontainebleau setback is the latest in Las Vegas developments to hit financing snags.
Boyd Gaming Co.’s $4.8 billion Echelon Place development was reportedly put on hold last summer because of financing woes, according to the Wall Street Journal.
The CityCenter development, jointly owned by MGM Grand and Dubai World, could have ended up in bankruptcy court as well if the partners hadn’t recently worked out their financial differences.