Luxury hotel operator Fontainebleau says that what's not happening in Vegas is the banks' fault. The chic chain has filed a $3 billion lawsuit against Bank of America ( BAC), JPMorgan Chase ( JPM) and several other banks, alleging they reneged on $800 million in financing for the resort company's Las Vegas Strip casino project. And the lawsuit threw in a bailout dig to boot. The complaint alleges that the lenders notified Fontainebleau Las Vegas on April 20 that they had purportedly "terminated" their commitments under an $800 million revolver loan, "ostensibly based on 'one or more' unspecified 'Events of Default,' " but without outlining any detail or specifics of an Event of Default." 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 Las Vegas has already borrowed and invested to build what is expected to be a landmark casino-resort on the Strip. "We are not asking for anything special, merely that the revolver banks fulfill the commitment they made to fund this project," said Jeff Soffer, executive chairman of Fontainebleau Resorts. "We need them to live up to their promises so that we can complete a landmark project that will help revitalize tourist visitation to Las Vegas."
The lawsuit also says that the wrongful termination of the loan "is all the more egregious in light of the tens of billions of dollars that certain of the Revolver Banks have received from the federal government's Troubled Asset
Relief Program." "Defendant Bank of America ... has to date received a total of $52.5 billion in federal assistance (including funds received in connection with its acquisition of Merrill Lynch ... the corporate parent of defendant Merrill Lynch Capital ... and JPMorgan Chase has received $25 billion dollars in federal assistance. "These TARP and other funds were provided to the banks with one purpose: to ensure that these banks would begin lending again, and would continue to lend, rather than further constricting the flow of credit that is absolutely critical for any economic recovery. "But instead of lending -- instead of standing by the contractual commitments to which they already agreed and are legally bound -- the defendant banks have seized upon a false pretext -- a nonexistent unspecified "Event of Default" -- in a vain attempt to escape their obligations." Bank of America spokeswoman Shirley Norton said, "We have not seen the suit, so have no comment." A spokesman for Merrill Lynch, which allegedly promised $100 million, declined comment when contacted by The Associated Press. JPMorgan Chase declined to comment when contacted by email. However, a source familiar with the situation said that the agreements were contingent upon Fontainebleau Las Vegas selling a certain number of condos at the site -- which they have not, the source said. The source also says that the builder was over budget, which also would violate the agreement.
Fontainebleau officials said work is nearly 70% done on the 24-acre, 63-story project, with casino officials aiming for an October opening. Fontainebleau's owners said that about 3,300 construction workers are currently on the site daily, and the resort's opening is "expected to result in over 6,000 full-time jobs at the facility, and approximately 2,000 additional jobs in Las Vegas." The lawsuit also named Barclays ( JPM), Deutsche Bank Trust Company Americas ( DB), Royal Bank of Scotland ( JPM), Sumitomo Mitsui Banking, New York, Bank of Scotland, HSH Nordbank, New York branch, Camulos Master Fund and MB Financial Bank. Another Las Vegas Strip development, MGM Mirage's ( MGM) City Center, has also been in the news lately over of its funding. MGM says the project will be completed.