Venetian, builder call truce

The Venetian and its general contractor, Lehrer McGovern Bovis Inc., said Wednesday they've agreed to a "stay" in the litigation pending between the two while they negotiate over who is responsible for cost overruns at the $1.5 billion Las Vegas Strip resort.

In a three-paragraph statement quoting Venetian President William Weidner and Bovis Chairman Luther Cochrane, the two sides said they will make "a good-faith effort to resolve all issues relating to the construction of the Venetian."

They pledged to cooperate "with each other and the trade contractors to complete construction of the Venetian ... and seek an amicable resolution to our dispute." Venetian officials have said privately they believe $10 million of additional work is needed to complete the project.

The two sides have sued each other over who is responsible for more than $250 million of claims filed for work done on the Venetian project so far.

Bovis has sued the Venetian and three affiliates for more than $580 million in damages and separately filed liens totaling $145 million for money it said it is owed. The Venetian has sued Bovis for $50 million-plus in damages.

The $250 million of claims include some duplication of liens filed by Bovis and local subcontractors hired by Bovis or Venetian for work on specific parts of the resort.

Bovis and Venetian officials differ on the actual amount of money owed and on who is responsible for paying it. Privately, Venetian officials assert there are $60 million to $70 million of "legitimate" claims, while Bovis executives say $145 million is a more accurate figure.

The Venetian says Bovis is responsible for paying subcontractors and absorbing overtime and other costs because it agreed to a guaranteed-maximum-price contract for building the resort.

Bovis says it incurred the additional costs to accommodate changes in the construction contract demanded and approved by Venetian owner Sheldon Adelson.

Neither Bovis nor Venetian officials would speculate on how long the negotiations might take before the talks either succeed or break down. They wouldn't estimate how long the "stay" in litigation would last if talks become stalled.

Meanwhile, a member of a local trade contractors' group formed to seek payment for their claims said the group has been approached by investors from both Las Vegas and elsewhere who've expressed interest in buying existing liens.

The Venetian Subcontractors Group, which consists of dozens of trade contractors who've filed liens against the Venetian, hasn't received any formal offers yet because the investors are still appraising the validity of the claims, said one group member who requested anonymity.

"The vultures are circling," the trade contractor said. He declined to identify the potential lien buyers beyond describing them as "big players from Las Vegas and from back East."

Buying the liens at a discount could give a purchaser an opportunity either to profit from satisfaction of the claims or to gain control of the Venetian through foreclosure.

As an example, liens bought for 50 cents on the dollar could result in a quick profit if either Bovis or the Venetian settles for 75 cents on the dollar -- a potential 50 percent return on investment.

If the liens are upheld in an enforcement action against the Venetian and the resort is unable or unwilling to pay, the property could be sold at auction, with proceeds used to satisfy the outstanding debts.

Alternatively, a lien holder with a valid court judgment could dictate who winds up in control of the property, as liens are superior to the securities held by holders of $425 million of Venetian mortgage bonds and $97 million of senior subordinated debt.

The Venetian or Bovis may "bond around" the outstanding liens if they are able to find someone willing to sell a bond for the full amount claimed. The entity selling the bond would be liable for the full amount should the claims be upheld in court.

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