Las Vegas Sun

March 28, 2024

Judge to expedite Fontainebleau bankruptcy case

Updated Thursday, June 18, 2009 | 9:31 a.m.

Fontainebleau Resort

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

A bankruptcy judge in Miami on Wednesday agreed to expedite the court's handling of a dispute pitting the bankrupt Las Vegas property against bank lenders that cut off funding for the $2.9 billion project, causing it to halt construction.

"We are very pleased that the court agreed to expedite our motion for partial summary judgment," Fontainebleau said in a statement. "Judge Jay Cristol ordered the banks to present their written arguments by July 1, with our written response due on July 7. We expect to have a hearing shortly after that to consider partial summary judgment and look forward to presenting our oral arguments."

An attorney for Bank of America -- and for other banks being sued by the resort over their decision to stop funding for construction this spring -- has not responded to a request for comment.

Fontainebleau wants the court to order the banks to release $656 million it says is needed to get the project back on track. The bank lenders say they cut off funding because Fontainebleau defaulted on its construction credit agreement because of cost overruns and other problems -- a charge denied by Fontainebleau.

A report in the Miami Herald said Cristol rejected a request by the banks that they be given three to four months to conduct discovery, with the judge saying such a delay would jeopardize funds already invested in the 70 percent-complete resort.

"What you're talking about is killing the project," Cristol said, according to the Herald. "We've got to do better than that."

The Herald reported the banks say the $800 million they had earlier committed to in a revolving credit facility will not be enough to complete the project, citing comments by Fontainebleau officials in April that projected costs had grown to be greater than the available funds.

"They're going to need substantially more, hundreds of millions of dollars more," Bank of America attorney Daniel Cantor told the court, according to the Herald. "Forcing the lenders to turn over money is not going to get this project fully built. We should not be forced to sink additional money into a project that is underfunded.''

Separately, creditor Young Electric Sign Co. (YESCO), which says it is owed some $18.7 million, filed a motion Wednesday to have the main bankruptcy case moved from Miami to Las Vegas.

YESCO said Fontainebleau Las Vegas LLC in its bankruptcy filing listed its 20 largest unsecured creditors holding $11.857 million in debt -- and that 60 percent of that debt is owed to six creditors in Las Vegas. Of the creditors, 705 are in Las Vegas compared to 93 in Florida, YESCO said.

"The vast majority of the parties impacted by the debtors' bankruptcies and the outcome thereof reside in Las Vegas," YESCO said in court papers. "This includes hundreds of debtors' creditors, contractors and employees."

YESCO said the case should be transferred to Nevada in the interest of justice and for the convenience for the parties.

A Fontainebleau spokesman said the company would address YESCO's motion in court.

The case was filed last week in Miami because that's where the Soffer family's Turnberry development organization is based.

Besides co-developing Fontainebleau Las Vegas, the Turnberry companies are known for developing several high-rise condominiums as well as the Town Square shopping center in Las Vegas.

A June 30 hearing was set on YESCO's motion to move the case to Nevada.

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