Fontainebleau Term Lenders Want Liquidation

LAS VEGAS-The Term lender Steering Group for the stalled Fontainebleau development here filed a motion in bankruptcy court last week to have the Ch. 11 reorganization converted to Ch. 7 liquidation. On top of the approximately $1 billion they loaned to help get the $2.9-billion project to 70% completion, the term lenders say an additional $16 million in cash collateral has been depleted during the bankruptcy process so far with “no meaningful progress” to show for it, and that it now believes there is “no reasonable likelihood” that the debtors can successfully reorganize and complete the project.

The members of the steering group include Brigade Capital Management LLC, Canyon Capital Advisors LLC, the Carlyle Group, Guggenheim Investment Management LLC and Highland Capital Management LP. The group’s motion comes on the heels of the denial of Fontainebleau’s motion in a related lawsuit to force other lenders for the project to hand over $656 million in promised late-stage financing they refused to provide, stalling the project and leading to the Ch. 11 filing.

“With completion of the project by the debtors not possible, a sale of the project to a third party and liquidation of the remaining assets is the only viable course to realize any meaningful value for creditors,” the term lenders state in their motion.