Wednesday, June 10, 2009 | 9:50 a.m.
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Australian casino resort company Crown Ltd. today said it wrote off its $250 million, 19.6 percent ownership interest in the now-bankrupt Fontainebleau resort development on the Las Vegas Strip.
"Crown also holds debt in Fontainebleau of U.S. $22 million. Crown will review the carrying value of its Fontainebleau debt at 30 June 2009, but expects that it will be written down to nil," the company, based in Melbourne, said in a statement. "Crown is under no obligation and has no current intention to contribute any further equity or debt to Fontainebleau or participate in any restructuring under any bankruptcy arrangements."
The lack of enthusiasm by Crown in pumping more money into Fontainebleau, which filed for bankruptcy Tuesday, isn't surprising.
Crown, run by businessman James Packer, has already taken hundreds of millions of dollars in write downs on its U.S. investments in Station Casinos Inc., Harrah's Entertainment Inc. and on a now-canceled project to build a resort on the Las Vegas Strip at the site of the former Wet ‘n’ Wild water park.
Crown this year also dropped its planned $1.75 billion purchase of Las Vegas-based Cannery Casino Resorts amid regulatory approval delays; and instead paid a $50 million deal termination fee and invested $320 million in the company.
The three Fontainebleau entities that filed for bankruptcy said that combined, they had debt of more than $1 billion, assets of more than $1 billion and more than 1,000 creditors. They have not yet filed a list of secured creditors. That list is important because the secured creditors in a bankruptcy case typically are key players in deciding the future of the debtor.
Fontainebleau Las Vegas LLC, Fontainebleau Las Vegas Holdings LLC and Fontainebleau Las Vegas Capital Corp. all filed for Chapter 11 bankruptcy protection Tuesday in Miami and blamed a group of banks for failing to provide nearly $800 million needed to complete construction of the resort.
Observers, however, have noted the project faced other problems that may have caused the banks to declare an event of default on the loan agreement.
Besides the weak gaming and hotel environment in Las Vegas marked by an oversupply of hotel rooms, there were reports and claims that the $2.9 billion Fontainebleau faced cost overruns, that it failed to sell enough condominiums and that the development was mismanaged.
In announcing the bankruptcy filing, Fontainebleau said it would seek financing to recommence construction of the resort -- now 70 percent complete -- while pursuing its legal claims against the banks.