Bad Luck Continues for Vegas Developers as Fontainebleau Files for Bankruptcy

Fontainebleau Las Vegas LLC and two of its affiliates are just the latest to find themselves flat out of cash in Sin City. The owners of the 3,900-room resort, which is 70 percent complete and was set to open in October, filed for Chapter 11 bankruptcy protection today. The move came after the property failed to receive nearly $800 million in construction funding from lenders for the new resort-casino project on the Las Vegas Strip. To gain access to the prearranged funding, Fontainebleau Las Vegas LLC filed a $3 billion lawsuit in April against lenders including Bank of America, Deutsche Bank Trust Company Americas, JPMorgan Chase Bank and eight others. Fontainebleau has since withdrawn the lawsuit in Las Vegas. It moved the case to the U.S. Bankruptcy Court in the Southern District of Florida, Miami, where the Chapter 11 petitions were filed for the company and affiliates Fontainebleau Las Vegas Holdings LLC and Fontainebleau Las Vegas Capital Corp. “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, in a statement. A group of non-defaulting lenders have agreed to let the company use cash for the administration of the bankruptcy case. Negotiations are in progress to obtain financing to recommence construction of the resort, which was set to include 180,000 square feet of indoor and 15,000 square feet of outdoor meeting space. “Our goal now is to secure funding to complete this world-class project and restructure our existing debt,” said Karawan. Fontainebleau Miami Beach is a separate legal entity and is not included in the filing. Turnberry West Construction Inc., the project’s general contractor, also continues to operate as normal. The company will continue to pursue the defaulting lenders, said its bankruptcy counsel Scott Baena of Bilzin Sumberg, in a statement. “Fontainebleau Las Vegas will continue to aggressively prosecute claims against these lenders for failing to honor their contractual commitments.”Nielsen Business Media