Penn National Gaming Inc. on Monday made a $50 million "stalking horse" bid to buy the stalled Fontainebleau casino-resort in Las Vegas, with plans to spend another $1.46 billion to complete the project.
Penn's offer, filed in Miami's bankruptcy court, sets in place an auction process in which other investors will have an opportunity to bid for the property.
Fontainebleau also said in a court motion Monday that Penn National and unnamed lenders have agreed to provide $51.5 million in debtor-in-possession financing to cover its costs since filing for bankruptcy and to keep the company afloat during the sales process.
Court papers indicated Penn National has committed $50 million to buy the project, less unspecified "remediation costs" and costs to cure defaults on leases and contracts it would inherit.
The Penn affiliate offering to buy the project is Nevada Gaming Ventures Inc. Penn for some time has been looking at opportunities to enter the Las Vegas gambling market, the nation's largest.
Now $50 million seems like small change for such a massive Strip resort... But let's remember just how all of this got started. This place has been one hot mess for quite a while, and Penn will still need to settle at least $350 million in debt and spend another $1.46 billion just to finish this resort.
But attorneys for Fontainebleau said they're hopeful Monday's bid is not the only offer for the project, which was developed by affiliates of Miami-based Turnberry Associates. Turnberry is known in Las Vegas for developing high-rise luxury condominiums and the Town Square Shopping Center.
"The debtors are both hopeful and optimistic that finalizing the purchase agreement marks the beginning of a competitive sale process that will drive substantial incremental value to the debtors' estates and their creditors over and above the purchase price offered by Nevada Gaming Ventures," Fontainebleau attorneys said in Monday's court filing.
Once valued at $2.9 billion, $1.675 billion has been borrowed against the 3,815-room Fontainebleau, where construction shut down this summer after Bank of America and other big banks canceled a loan agreement because of cost overruns and other problems.
This may be the end of the line for Turnberry's Las Vegas operations. At the very least, I'm not expecting any more Turnberry projects on or near The Strip any time soon.
But hopefully, this will be a much needed turn of the page for F-bleau. It needs to be finished ASAP to start making money. And if Penn succeeds in gobbling it up in bankruptcy court, then Penn will be getting it in a real steal of a deal! I hope they'll finish F-bleau soon enough so that it won't be just another North Strip "abandoned construction" eyesore. Hopefully by late 2010 and early 2011, the economy will have recovered enough to absorb the new rooms online.