Las Vegas Sun

March 28, 2024

Fontainebleau debt rating downgraded after bankruptcy

Fontainebleau Resort

The Fontainebleau, construction stopped, is seen dark along the Strip. Launch slideshow »

Investors in the bankrupt Fontainebleau resort's debt may not recover much of their money through the bankruptcy process, debt rating agencies said Wednesday.

In response to the bankruptcy, Moody's Investors Service downgraded Fontainebleau's corporate debt rating to Ca (highly speculative).

And Standard & Poor's Ratings Services lowered its corporate credit and issue-level ratings to its lowest level, D.

"The recovery rating on the credit facilities was revised to 6, indicating our expectation of negligible (0 percent to 10 percent) recovery for lenders in the event of a payment default, from 4 (30 percent to 50 percent)," Standard & Poor's said.

"We had contemplated a default occurring in 2010, following the opening of the company's Las Vegas gaming facility. Given the funding requirements remaining to complete the project, which exceed our previous estimates for gross enterprise value of the property, we now expect senior secured creditors to realize 0 percent to 10 percent recovery," Standard & Poor's credit analyst Ben Bubeck said in a statement.

The $2.9 billion resort project on the Las Vegas Strip, 70 percent completed, filed for bankruptcy protection after lenders refused to fund $656 million the company said was needed to complete the project.

But even before banks halted funding, Standard & Poor's had warned in February that the resort would be unable to make its $200 million in annual debt payments because of the weak economy that has harmed the Las Vegas gaming industry and the lack of condominium sales at the resort.

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