US casino firm claims lender tried to "destroy" its new resort
Posted by Gavin Smith on 14 May 2009 at 09:05
The company building an ambitious new Las Vegas casino resort has accused one of its lenders of "seeking to destroy" the project to minimise competition with another scheme.
Fontainebleau Las Vegas altered a $3 billion (£2 billion) lawsuit against a group of banks and demanded additional damages from Deutsche Bank Trust Company Americas, Business Wire reports.
The amended version says Deutsche Bank Trust Company Americas should pay up for "seeking to destroy the Fontainebleau in order to minimise competition" with another project, the Cosmopolitan Resort and Casino, which is now completely owned by a subsidiary of Deutsche Bank.
Fontainebleau Las Vegas is suing a group of lenders after they went back on contractual commitments to supply the firm with nearly $800 million in funding for construction.
The changed lawsuit involves two additional claims against Deutsche Bank, Business Wire reports, with one saying the bank allegedly tried to encourage other lenders to go back on their obligations and also meddled with the efforts made by other banks to sort out their disputes with Fontainebleau.
According to Business Wire, the amended version says: "To further its own interests as the Cosmopolitan’s owner and developer, Deutsche Bank is now seeking to destroy the Fontainebleau in order to minimise competition with the Cosmopolitan project.
"Deutsche Bank's misconduct is more than just a breach of its own contractual obligations. To serve its own conflicting interest in ensuring the success of the Cosmopolitan, Deutsche Bank has induced other Revolver Banks to breach their own commitments."
Fontainebleau Las Vegas and the Cosmopolitan are both under construction on the Las Vegas strip at what is a testing time for the Nevada gambling market.
The lawsuit was filed at the District Court of Clark County, Nevada, and also says Deutsche Bank and its affiliates were lenders to the Cosmopolitan.
Business Wire adds Deutsche Bank actually foreclosed on the Cosmopolitan and bought the $3.9 billion project through an affiliate for $1 billion in a foreclosure deal last year.
The report also states the lawsuit adds: "Deutsche Bank’s more than $1 billion ownership stake in Cosmopolitan far exceeds its commitment to Fontainebleau, providing Deutsche Bank with a strong incentive to undermine Fontainebleau's development and future prospects."
Last month the Associated Press reported Bank of America, one of Fontainebleau's lenders and also a defendant in the overall case, was discussing "restructured financing" with the company.
Construction at the Fontainebleau site slowed after the lending disputes escalated. The firm has said it must have the $800 million from the lenders to pay bills and complete a 3,800 room hotel.
Currently about three-quarters complete, the overall scheme is scheduled to open later this year.
Quoted by Business Wire, Jeff Soffer, executive chairman of Fontainebleau Resorts, said the "banks’ refusal to honour their lending commitments is creating enormous hardship for thousands of union construction workers and their families".
He added it was "imperative" that the banks "honour their contractual obligations" so the company can reinstate construction jobs.
Business Wire lists the defendants in the case as Bank of America, N.A.; Merrill Lynch Capital Corporation; JPMorgan Chase Bank, N.A.; Barclays Bank PLC; Deutsche Bank Trust Company Americas; The Royal Bank of Scotland PLC; Sumitomo Mitsui Banking Corporation New York; Bank of Scotland; HSH Nordbank AG, New York Branch; and MB Financial Bank, N.A.
