A Las Vegas casino resort developer is taking on major US banks in a multi-billion dollar legal suit against a decision to renege on $800 million in prearranged funding.
Fontainebleau Las Vegas LLC, which is developing a major casino resort on the Las Vegas Strip, has launched the $3 billion lawsuit against some of the world's top banks, including the Bank of America, Merrill Lynch, JPMorgan Chase, Barclays, Royal Bank of Scotland, Sumitomo Mitsui, and Deutsche Bank. Fontainebleau claims the banks and other lenders unjustifiably backtracked on their contractual commitments to provide the company with almost $ 800 million in prearranged funding.
The lawsuit makes particular note of the fact that Bank of America, JP Morgan Chase and certain other lenders involved in the lawsuit received tens of billions of dollars in federal bailout money that was meant to increase the flow of credit to businesses such as Fontainebleau.
The legal papers filed this week in the District Court of Clark County, Nevada do not mince words: “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 casino-resort, a promise in exchange for which the Banks have already secured for themselves tens of millions of dollars in fees,” it charges.
And on Friday a public statement issued by Fontainbleau was equally hard-hitting, accusing the banks of misconduct which was "....calculated, intentional and malicious."
The statement continued: "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 Fontainebleu and thousands of employees and their families are relying on those commitments to be performed.”
The banks apparently notified Fontainebleau on Monday that they had unilaterally “terminated” their commitments under an $ 800 million revolver loan, the company revealed, claiming that this unexpected action was “....ostensibly based on ‘one or more’ unspecified ‘Events of Default,’ but without outlining any detail or specifics."
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 has already borrowed and invested to build what is expected to be a new landmark casino-resort on the Las Vegas Strip.
The company says that the banks' “brazen breach of contract” endangers the developer's ability to complete its casino-resort.
The project, situated diagonally opposite Circus Circus, is more than 70 percent completed, and failure at this point will cause massive harm to both the project and the local economy, says Fontainbleau, with the jobs of 3 300 construction workers and an additional 1 700 workers in the final stages of the construction placed at risk. The new casino-resort is also scheduled to employ some 6 000 locals, and these jobs, too, could be placed in peril. Damage to construction suppliers and contractors would also inevitably flow from a failure to complete.
Fontainebleu is partly owned by Australia's gambling entrepreneur James Packer through his Crown Casinos firm, which has invested $250 million in Fontainebleu and holds a 19.60 percent interest in the developer.