Judge names examiner to push for Fontainbleau sale

A judge overseeing the Fontainebleau Las Vegas bankruptcy in Miami decided Thursday to appoint an examiner to move toward a sale of the project instead of a liquidation in Chapter 7.

U.S. Bankruptcy Judge A. Jay Cristol said he wants the developer involved, but wants a sale of the stalled Strip project to move forward quickly.

“My goal is to move things along and not delay,” Cristol said in court.

The judge overruled a Fontainebleau attorney’s request to delay a decision a week while the developer negotiates with potential bidders.

“There is active interest, and we have arranged several tours of the property,” Fontainebleau attorney Scott Baena said. “There are quite a few potential bidders.”

Fontainebleau Las Vegas officials declined to comment Thursday on Cristol’s decision, as did a potential bidder on the project, Penn National Gaming.

Penn emerged as a bidder for the bankrupt project this week, offering less than $300 million for the stalled project.

The Wyomissing, Pa.-based gaming company is scheduled to continue negotiating with some of the creditors of the project Friday, Las Vegas-based attorney Greg Garman told the court.

Garman, who represents a group of contractors holding mechanics liens against the project, said Penn is offering “substantially less” than $300 million, but he would not say what the amount was.

Construction on the mixed-use project is 70 percent complete. It has been estimated at least another $1.5 billion will be needed to complete construction.

The amount of funding needed to complete the project could prove too much for many potential bidders to overcome, Cristol said.

“I’m not sure there are many people with a few hundred million dollars to bid and then have a billion dollars or more in their back pocket to complete the project,” Cristol said.

One group that may no longer be interested in acquiring the project is New York-based private equity firm Apollo Management.

The law firm representing Apollo filed a notice of withdrawal with the court Oct. 5.

The Review-Journal reported in June that representatives from Apollo, which owns a 50 percent stake in Harrah’s Entertainment, had toured the project.

The developer, Miami-based Fontainebleau Resorts, has been making moves in court that could indicate it has given up hope of the project restarting in the near future under its ownership.

Cristol approved a Fontainebleau Las Vegas motion Monday to cancel a lease for 26 acres that was being used as a construction staging area for the Strip project.

The former Wet ’n Wild site was costing the developer $350,000 a month and was being used to store materials and equipment that were to be delivered to the project. It also was a parking lot for subcontractors and their employees.

The lease agreement, signed in April 2007, was set to expire next month.

Cristol also granted Fontainebleau’s request to terminate two construction trailer leases costing the developer as much a $578 each per month.

The Wet ’n Wild site, owned by the Archon Corp., was where Texas-based developer Christopher Milam wanted to build a 1,064-foot hotel tower before the economic downturn tightened credit markets.

Fontainebleau Las Vegas and two affiliates filed for Chapter 11 bankruptcy protection from creditors June 9, listing assets and debt of more than $1 billion each.

The project is on 24 acres on the corner of Las Vegas and Riviera boulevards.

Contact reporter Arnold M. Knightly at aknightly@reviewjournal.com or 702-477-3893. Bloomberg News contributed to this report.