Published Thursday, Jan. 14, 2010 | 3:41 p.m.
Updated Thursday, Jan. 14, 2010 | 7:33 p.m.
Penn National Gaming, which spent months investigating the purchase of the unfinished Fontainebleau Las Vegas resort on the Strip, will not bid on the property at an upcoming bankruptcy auction, a spokesman for the Pennsylvania-based casino company said today.
With Penn National Gaming out of the running, billionaire investor Carl Icahn, who outbid Penn by about $10 million for the right to kick off the bidding process, could end up owning the resort unless other bidders emerge by a Friday deadline.
With Las Vegas saturated with hotel rooms in the recession and money for casino development on the Strip hard to come by, it's uncertain whether anyone else will emerge with the money and inclination to buy the Fontainebleau. Icahn bid a mere $105 million in cash for the property, in addition to $51 million in financing – money that will be put toward paying back debts owed lenders and protecting the vacant building from the elements.
Fontainebleau's developers had already spent $2 billion on the resort when lenders pulled financing for the building in the midst of the downturn, forcing the property to declare bankruptcy. Penn National estimated it would cost $1.5 billion to finish the resort and had accumulated cash and loans to finish the job. Penn exited the bidding process after offering about $95 million in cash and the same financing package as Icahn's.
An independent examiner appointed to collect competing bids will determine by Jan. 19 if any bids are backed by the money and expertise to take over the project. If any bids exceed Icahn's offer of $156.2 million, an auction will be held Jan. 21 to determine the winning bid.
Several companies have signed confidentiality agreements with the examiner to review closely held financial and construction documents on the Fontainebleau. These groups, whose names haven't been disclosed, have yet to publicly announce a bid for the property.