The legal team of Jeffrey Soffer is negotiating to bid off the Fontainebleau Las Vegas with a starting bid that would only to amount pennies on the dollars for the unfinished casino hotel.
Scott Baena, the Miami bankruptcy lawyer representing the Vegas Fontainebleau said that Penn National Gaming has offered to pay less than $300 million for the Fontainebleau Vegas, a project that has already spent about $2 billion.
Baena said in a court hearing on October 5th, 2009 that Penn National would bid less than $300 million for the casino property. Baena refused to say how much less Penn National will pay for Fontainebleau. One appraisal of the construction location placed the value at less than $400 million. Penn would be considered as the “stalking horse” bidder for the casino, meaning the group’s offer would be set at a minimum price for the 3,889 casino hotel.
Other bidders for Fontainebleau could offer more. Richard Mason, a New York attorney representing Penn National said that they hope that the deal will turn alright for them. In exchange for its “stalking horse” position, Penn National would finance Fontainebleau’s bankruptcy expenses. Creditors are pushing bankruptcy court judge A. Jay Cristol to shift the Fontainebleau bankruptcy case from Chapter 11 reorganization to Chapter 7 liquidation.
The lawyers said that Jeffrey Soffer has too much at stake in the venture to negotiate a bid that would be fair to creditors. Two lender lawyers-Michael Goldberg of Akerman Senterfitt and Craig Rasille of Hunton and Williams-were not available for comment on the issue. Baena of Miami’s Bilzin Slumberg stated that he hopes to present an official agreement to Cristol as soon as possible, with an auction of Fontainebleau by the end of the year.
Penn National, a publicly traded organization that has its headquarters in Wyomissing, Pennsylvania, owns eleven casinos across the US and the Fontainebleau would be its first casino property in Las Vegas. Baena said that Soffer stands to lose $500 million on the Fontainebleau Vegas, a condo-hotel he announced the same day he acquired the Fontainebleau Miami Beach in 2005.
Casino construction overruns and a collapse Las Vegas condominium industry affected financing plans for the $3 billion Las Vegas project and banks cut off $800 million in funding this spring. That forced the casino’s June Chapter 11 bankruptcy filing.
As the economy took a turn for the worse last year, Soffer sold a fifty percent stake in the Fontainebleau Miami Beach for $375 million to a gaming arm of the government of Dubai and then transferred $200 million of the proceeds to the Vegas gaming project.
The Fontainebleau property in Las Vegas is not part of the Vegas bankruptcy. Cristol, a notable bankruptcy judge, said that prospective agreements come and go in Chapter 11 bankruptcy cases. Cristol scheduled a hearing on why he should not appoint an outsider in charge of selling the bankrupt casino hotel and pressed Baena and Mason to come up with an official agreement on the issue.