Project Default Pounds Perini - TheStreet

Project Default Pounds Perini

Shares slide after a big Vegas construction deal hits trouble.
Publish date:

Updated from 10:16 a.m. EST

Shares of



were slammed Thursday on news that one of the construction company's largest projects is facing possible foreclosure.

The developer of the $3 billion Cosmopolitan Resort & Casino project in Las Vegas defaulted on its $760 million construction loan from Deutsche Bank on Wednesday.

The property has now become a dark spot for Perini, which

highlighted earlier this week as a

stock set to hit trouble because of the slowing economy and problems looming at Vegas projects.

Shares recently were tumbling $8.25, or 22%, to $29.45.

While Perini had blamed delayed construction for the project on difficult excavation work, speculation had swirled around Las Vegas in recent months that the owners had run into financing problems.

Construction work at the Cosmopolitan slowed because the owners did not secure financing for the entire project, say sources in the Las Vegas market. Costs at the project escalated from an estimated $1.5 billion, when announced in 2005, to the current level of $3 billion.

Ian Bruce Eichner, the developer and owner of the Cosmopolitan project, told the

Associated Press

late Wednesday that his company, 3700 Associates, was working with Deutsche Bank and Merrill Lynch to find new investors.

Hedge fund Dune Capital was the original equity investor in the project, but sold its piece to Marathon Asset Management, one source familiar with the situation says.

Eichner and his partners now need to secure additional equity investors in order to find financing to finish the project, the source says.

Perini confirmed the notice of default in a press release Thursday morning. As of the end of last year, about $1.4 billion of construction was left on the project, the company said.

The $1.4 billion equates to about 18% of Perini's backlog as of the end of September, the latest date for which data is available.

"Currently, Perini is in discussions with the developer and lender to facilitate an orderly continuation of construction of the project. Pending the outcome of these discussions, the company is unable to determine the financial impact, if any, at this time," Perini said.

"At this time, construction work continues and all current amounts due to Perini have been paid pursuant to the terms of the construction contract," the company added.

Perini CEO Ronald Tutor, meanwhile, has made big profits from his company lately. He unloaded a significant amount of shares over the past year, most recently selling $30 million of company stock from November to December.

Those sales may have helped fund a $30 million gift he pledged in October to the University of Southern California.