Failure to Fund Loan Would Further Damage Las Vegas Economy
LAS VEGAS, NV--(Business Wire))--Fontainebleau Las Vegas, LLC filed a $3 billion lawsuit today against Bank of America, JPMorgan Chase Bank, Deutsche Bank Trust Company Americas and certain other lenders after they reneged on their contractual commitments to provide the Company with almost $800 million in prearranged funding.
(Fontainebleau Las Vegas project 70 percent completed, top right photo)
The lawsuit notes that Bank of America, JP Morgan Chase and certain other lenders charged in the lawsuit collectively received tens of billions of dollars in federal bailout money that was meant to increase the flow of credit.
“This case arises from the breach by a group of unscrupulous banks of their clear and unequivocal written promise to Fontainebleau to finance the construction of its multi-billion dollar casino-resort development project in Las Vegas (the “Project”) -- a promise in exchange for which the Banks have already secured for themselves tens of millions of dollars in fees,” according to the lawsuit filed by Fontainebleau Las Vegas in the District Court of Clark County, Nevada.
(Rendering of Fontainebleau Las Vegas, middle left)
The lenders’ “misconduct here was calculated, intentional and malicious.
"Defendants abandoned their lending commitments solely to try to extricate themselves from a loan they no longer wish to make, notwithstanding that those commitments are clear, unequivocal, and binding, and that Plaintiff and thousands of employees and their families are relying on those commitments to be performed.”
The complaint alleges that the lenders notified Fontainebleau Las Vegas on April 20, 2009 that they had purportedly “terminated” their commitments under an $800 million revolver loan, “ostensibly based on ‘one or more’ unspecified ‘Events of Default,’” but without outlining any detail or specifics of an Event of Default.
According to the lawsuit, “In fact, there has been no Event of Default, and there is no contractual basis whatsoever for the Revolver Banks’ breach of their clear and unambiguous obligations. The purported termination is nothing more than the Banks’ baseless attempt to walk away from the Project and abandon their obligations.”
The $800 million loan is in addition to more than $2 billion in debt and equity that Fontainebleau Las Vegas has already borrowed and invested to build what is expected to be a new landmark casino-resort on the Las Vegas Strip.
"We are not asking for anything special, merely that the revolver banks fulfill the commitment they made to fund this project,” said Jeff Soffer, (middle right photo) Executive Chairman of Fontainebleau Resorts LLC. “We need them to live up to their promises so that we can complete a landmark project that will help revitalize tourist visitation to Las Vegas."
The lawsuit says that the banks’ “brazen breach of contract” jeopardizes Fontainebleau Las Vegas’ ability to complete its signature casino-resort on the Las Vegas Strip.
(Bank of America building, San Diego, CA, middle left photo)The project is more than 70 percent complete, with finish work being undertaken in the resort's sleeping rooms and suites.
Failure to provide the funding will, according to the lawsuit, “cause enormous harm to the public interest” by further damaging the local economy.
“In addition to the approximately 3,300 construction workers on-site daily (plus the additional 1,700 workers who would be needed to work on the final stages of the Project) and hundreds of others presently employed by the Project, the opening of the Fontainebleau Las Vegas is expected to result in over 6,000 full-time jobs at the facility, and approximately 2,000 additional jobs in Las Vegas,” according to the lawsuit.
“All of these sources of employment will vanish as a result of the Banks’ breach -- a further blow to a local economy that, in the words of the Las Vegas Sun, is in ‘freefall’ and may be in for its ‘longest recession since the Great Depression.’”
Further damage will be caused to the many suppliers and contractors from across the country that are supplying materials and services to the project.
The lawsuit also says that the wrongful termination of the loan “is all the more egregious in light of the tens of billions of dollars that certain of the Revolver Banks have received from the federal government’s Troubled Asset Repurchase Program (“TARP”).
(JP Morgan Chase Tower, Houston, TX, middle right photo)
Defendant Bank of America, N.A., has to date received a total of $52.5 billion dollars in federal assistance (including funds received in connection with its acquisition of Merrill Lynch & Co., Inc., the corporate parent of defendant Merrill Lynch Capital Corporation) and JPMorgan Chase has received $25 billion dollars in federal assistance.
These TARP and other funds were provided to the Banks with one purpose: to ensure that these Banks would begin lending again, and would continue to lend, rather than further constricting the flow of credit that is absolutely critical for any economic recovery.
But instead of lending -- instead of standing by the contractual commitments to which they already agreed and are legally bound -- the defendant Banks have seized upon a false pretext -- a nonexistent unspecified “Event of Default” -- in a vain attempt to escape their obligations.”
The lawsuit was filed against Bank of America, N.A., Merrill Lynch Capital Corporation, JPMorgan Chase Bank, N.A., Barclays Bank PLC, Deutsche Bank Trust Company Americas, The Royal Bank of Scotland PLC, Sumitomo Mitsui Banking Corporation New York, Bank of Scotland, HSH Nordbank AG, New York Branch, Camulos Master Fund LP, and MB Financial Bank, N.A.
Fontainebleau Las Vegas is represented by Kasowitz, Benson, Torres & Friedman LLP of New York, and Morris Peterson of Las Vegas, Nevada.
Fontainebleau Las Vegas is seeking specific performance of the Revolver Banks’ obligations, as well as recovery from the Revolver Banks of all of its damages resulting from the lender’s bad faith breach of their obligations, including consequential damages arising from their bad faith and wrongful conduct, totaling in the billions of dollars, but in no event less than $3 billion.
Neither the lawsuit nor the $800 million loan affect Fontainebleau Miami Beach, (bottom right photo) which is a separate legal entity from Fontainebleau Las Vegas and which is currently open and operating.
Contact: Sitrick And Company, Lance Ignon, 415-793-8851 or Dave Satterfield, 408-802-6767
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