Fontainebleau says $130 million available for construction

The developer of the Fontainebleau has $130 million available to continue funding construction, a spokesman for the project said today, keeping more than 3,300 construction workers moving the project toward an October opening.

Representatives for the construction unions working on the 3,815-room Strip hotel and casino project expressed disappointment in lenders who have pulled $800 million in committed funding. Steve Ross, secretary-treasurer of the Southern Nevada Building, said in a statement the affiliated unions were “shocked” by the actions of the banks.

“This move threatens the livelihoods of several thousand of our members working on the project,” Ross’ statement read. “It threatens their families, their ability to pay their mortgages and their ability to put food on the table.”

The Fontainebleau filed a $3 billion lawsuit Thursday against a group of 11 lenders, led by led by Bank of America, Barclays Bank, Merrill Lynch Capital Corp., and JPChase Morgan. Fontainebleau’s complaint, filed in Clark County District Court, claims that the lenders notified the developer on Monday that they were terminating the agreed-upon financial commitment because of an unspecified event of default.

Fontainebleau officials, however, deny there has been a default, stating the banks’ actions jeopardize the project.

A few of the banks declined comment today stating they had yet to see the lawsuit. The $800 million loan is in addition to more than $2 billion in debt and equity that Fontainebleau Las Vegas has already borrowed, according to a company statement.

Clark County Commissioner Chris Giunchigliani said she was bothered by the banks’ arrogance in pulling the funding on the project.

“I think it’s unbelievable that at this stage of the game the banks would play that kind of game,” said Giunchigliani, whose district includes the Fontainebleau. “I think there’s going to be some political pressure from Washington, and there probably needs to be.”

Bill Lerner, a principal with gaming research firm Union Gaming Group, said the banks may be looking to renegotiate terms to limit their risk on the project.

“Commercial banks are trying to derisk right now,” Lerner said. “When you want to renegotiate something or mitigate your exposure, you’re going to look for some trip, and that looks like what (the banks) have done.”

Fontainebleau spokesman Dave Satterfield said that project officials are looking at a number of alternative financing opportunities, including possible equity investors, while pursuing the lawsuit.

“The main issue they’re focusing on right now, and that’s why they filed the lawsuit, is to get these lenders to comply with their contractual commitments to provide this money,” Satterfield said. “That’s job number one and see where that goes over the next couple of weeks.”

The company, however, declined to say if those discussions with potential equity investors include Australia-based Crown Limited, which holds a 19.6 percent share in the resort’s parent company. Crown Limited, which is controlled by billionaire James Packer, paid $250 million in April 2007 for a 19.6 percent stake in Fontainebleau Resorts, which also owns the recently completed $1 billion remodel of Fontainebleau Miami Beach.

The area’s unemployment rate would move past 11 percent should the Fontainebleau’s financing situation not be resolved and construction is halted, according to Jeremy Aguero, a principal with the local research firm Applied Analysis. Las Vegas unemployment was 10.4 percent in Mach, matching the rate for Nevada.

And the hit on employment and the area’s economy goes beyond the immediate loss of construction jobs should the project not be completed, Aguero said.

The mixed-use development is estimated to employ 6,200 people at the resort with another 350 employed by businesses using rental and retail spaces at the property, delivering salary and wage payments of $246 million annually to workers in Southern Nevada, according to an Applied Analysis study commissioned by Fontainebleau.

The economic impact of the resort, which includes 7-acre pool deck, 27 restaurants, a 68,000-square-foot spa, a 100,000-square-foot casino and a 300,000-square-foot retail center called The Runway, is estimated to have an annual economic impact of $1.1 billion to the state, according to the study.

The secondary employment and impact, which includes business with vendors, includes another 1,250 jobs, $115 million annually in wages and $600 million in additional economic impact after opening, Aguero said.

Steve Redlinger, a Building Trades spokesman, said the unions’ main concern was that as many workers as possible stay employed until the project is completed.

“At this point, we’re working with the project owner to see what the status is and try to get some insight ourselves,” Redlinger said. “Try to, at least, put the minds of those 3,300 workers at ease. We’re going to work day and night to make sure that this project continues and those workers remain employed.”

Contact reporter Arnold M. Knightly at aknightly@reviewjournal.com or 702-477-3893.