Published Thursday, April 23, 2009 | 5:52 p.m.
Updated Friday, April 24, 2009 | 3:56 p.m.
Beyond the Sun
Fontainebleau Las Vegas
Fontainebleau Las Vegas filed a $3 billion lawsuit against a group of bank lenders Thursday, saying the banks reneged on their commitments to provide funding for the resort in a "baseless attempt to walk away from the project."
Pulling the funding could force the 3,800-room resort to stop construction, threatening the jobs of some 3,300 construction workers building the project between the Riviera and Sahara casinos on the east side of the Las Vegas Strip and resulting in the loss of more than 6,000 jobs at the resort, according to the lawsuit.
A Fontainebleau spokesman today the company has more than $130 million in cash that will allow construction to proceed. The company is in "active discussions to secure financing if lenders don't live up to their commitment," spokesman Lance Ignon said.
The lawsuit alleges that the banks refused to commit to prearranged financing of $800 million for the resort under construction on the Strip, in spite of the billions of dollars they received as part of a federal bailout program to loosen credit.
The banks "abandoned their lending commitments solely to try to extricate themselves from a loan they no longer wish to make, notwithstanding that those commitments are clear, unequivocal and binding and that the plaintiff and thousands of employees and their families are relying on those commitments to be performed," the lawsuit states. A Bank of America spokeswoman declined to comment on the lawsuit Friday.
The $800 million revolving loan facility is in addition to more than $2 billion in debt and equity that Fontainebleau Las Vegas had borrowed and invested to build the project.
Another group of lenders has loaned more than $1 billion to Fontainebleau Las Vegas through a separate term loan.
The banks informed Fontainebleau executives Monday that they were terminating the $800 million revolving loan facility based on "one or more events of default" that were unspecified.
The lawsuit contends that no default occurred that could allow the banks to pull out of the loan agreement.
"(T)here is no contractual basis whatsoever for the revolver banks’ breach of their clear and unambiguous obligations," it states.
The terms of the loan agreement aren't public, and Fontainebleau Las Vegas, a joint venture between Las Vegas casino executives and condominium developer Turnberry Associates, is a privately held company.
Fontainebleau officials said work is nearly 70 percent done on the 24-acre, 63-story project. Officials expect an October opening for the $3 billion resort.
Fontainebleau said last fall that it planned to raise between $700 and $900 million through condominium sales at the property on the north end of the Las Vegas Strip.
But spokesman Dave Satterfield said Friday that Fontainebleau does not currently have any condos on the market and the resort is taking “interested names.” Fontainebleau would not disclose how many names are on their list of interested parties or when condos will go up for sale.
Satterfield said because of the depressed condo market, Fontainebleau is evaluating when to put the condos on the market and at what price.
The resort is expected to open with 3,185 rooms -- 1,000 of which developers are hoping to sell as condo units -- but Fontainebleau might take a look at that original plan, Satterfield said.
“They were always intended to be condo hotel units that would be up for rent and if they didn’t sell as condos, they would be hotel rooms. Given the economy, Fontainebleau is continually reassessing the mix of what those should be,” Satterfield said.
Senate Majority Leader Harry Reid said in a statement Thursday that he's hoping for a quick resolution "because thousands of families are counting on it and so is Nevada’s economy."
"It is wrong, plain and simple, that the banks named in the lawsuit are trying to back out on their commitment to this important project," Reid said. "One of the issues I have been working on hardest is freeing the flow of credit for job-creating projects like this one. When banks, especially ones that have received taxpayer dollars, make a commitment to finance a worthy project with thousands of existing jobs on the line, they have an obligation to keep that promise."
Fontainebleau Las Vegas is represented in the lawsuit by Kasowitz, Benson, Torres & Friedman LLP of New York, and Morris Peterson of Las Vegas.
Sun reporter Amanda Finnegan contributed to this report.