Rumors of financial instability have swirled around the Fontainebleau Las Vegas for the past year, as other projects were postponed or cancelled during the recession that is hitting the city hard.

Last month, parent company Fontainebleau Resorts, which also operates the hotel of the same name in Miami, filed a $3 billion lawsuit against a collection of lenders charging that they reneged on an agreement to provide an additional $800 million in financing needed to complete the project. The company, controlled by Miami developer Jeffrey Soffer, said that the banks are trying to “walk away from the project and abandon their obligations.”

The banks informed Fontainebleau last month that they would not provide the $800 million in funding because of "one or more events of default" which were not described. Fontainebleau denies that it has defaulted on any of the more than $2 billion in loans it has received to build the Las Vegas project.

  Soffer has a powerful ally, however. Senate Majority Leader Harry Reid has weighed in on the side of the Fontainebleau. He says banks that have taken bailout money should not be walking away from their commitments.

“It is wrong, plain and simple,” he said in a statement released by his office. "When banks, especially ones that have received taxpayer dollars, make a commitment to finance a worthy project with thousands of existing jobs on the line, they have an obligation to keep that promise."

Speculation is that lenders are afraid that the stagnant condo sales at the property and declining visitation numbers will eventually make it difficult for Fontainebleau to make all its payments after the property opens in October.

The Fontainebleau has continued construction even during the downturn. In March, the company announced it was set to open in October with 3,815 rooms. More than 1,000 of those rooms were scheduled to be sold as condos, with the company expecting to raise almost $900 million via those sales.

    Fontainebleau is a joint venture between Soffer’s Turnberry Associates, a condo developer, and a group of Las Vegas casino executives led by former Mandalay Bay President Glenn Schaeffer.

By Casino Connection Staff