The sorry saga of the US $3 billion Fontainebleau Las Vegas seems to have reached the point where bidders for the company in the hands of Chapter 11 bankruptcy court start rubbing their hands in the belief that they’ll pick up the half-built complex for a song.

Upon speculation of prospective bids and Lenders’ pressure on bankruptcy Judge A. Jay Cristol to shift the bankruptcy case to a Chapter 7 liquidation through a court-ordered sale, the Judge said: “Negotiations are wonderful, but we have a saying in South Florida: Show me the money.”

Casino operators Penn National Gaming has offered to pay less than US $300 million for the Fontainebleau Vegas, which has already incurred US $2 billion in development and construction costs. According to Scott Baena, a Miami bankruptcy lawyer representing the Vegas Fontainebleau, Penn would bid less than $300 million for the property. The lawyer believes that other bidders could offer more: “It's the beginning of a process. It never gets worse for us. It only gets better.”

Richard Mason, a New York lawyer representing Penn, said: “Folks in this case have focused on the amount of money that has already been spent on the project, which has been substantial and perhaps extraordinary. There's a lot of money left to spend, and I think anyone's price would reflect that.”

Finishing the Fontainebleau Vegas could require another US $1.5 billion, and Mason said that the pending construction bill requires a deep discount for the property, which already carries US $1.6 billion in construction debt, and accordingly, this would reflect on the Penn bid. Certainly, one appraisal of the construction site pegged the market value at less than US $400 million.

Construction overruns and the collapse of Las Vegas condominium properties foiled financing plans for the US $3 billion Vegas Fontainebleau project, which saw banks cutting off US $800 million in funding earlier n the year, forcing the 3,889-room hotel company into Chapter 11 filing last June. For Penn, a publicly traded company headquartered in Wyomissing, Pennsylvania, which owns 11 casinos across the country, the Fontainebleau would be its first Vegas property. (E-10.07.09)

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