By Matt Jarzemsky
Bank of America Corp. agreed to pay a group of lenders to the
failed Fontainebleau Las Vegas $300 million to settle allegations
it improperly advanced funds to the casino project as its finances
deteriorated, according to the bank's annual report.
The settlement ended a multiyear legal battle over BofA's role
administering a $1.85 billion credit facility to fund the project,
which filed for bankruptcy protection in 2009. BofA stopped funding
construction of the resort after finding Fontainebleau Las Vegas
had allegedly been concealing cost overruns, according to a federal
court filing.
A group of loan holders including hedge funds Avenue Capital
Group, Brigade Capital Management and Caspian Capital LP, later
sued BofA. The lenders said the bank kept advancing funds they were
providing to Fontainebleau Las Vegas for several months during
which BofA should have known conditions for the financing weren't
being met, according to a complaint. In doing so, BofA breached an
agreement under which the bank was managing their funds, they
alleged.
Bank of America declined to comment beyond the filing.
The Fontainebleau Las Vegas project--meant to include 3,800
guest rooms, a casino, a convention center, restaurants and
bars--became a symbol of the Strip's woes in the wake of the
financial crisis. The development was proposed in 2005, took on a
$2.9 billion budget and reached more than 70% completion before
lenders cut off support.
The owner of the development filed for Chapter 11 bankruptcy
protection, but the property was later bought by an entity owned by
billionaire investor Carl Icahn.
In January, a bankruptcy judge approved a settlement between the
trustee in charge of the project and Fontainebleau Las Vegas's
former directors and officers. Under the deal, Jeffrey Soffer, the
Miami developer behind the project, agreed to contribute $2.5
million out of his own pocket to the $27.5 million settlement,
which will go to creditors.
Mr. Soffer had conceived Fontainebleau Las Vegas as a sister
property to a Miami hotel he had purchased.
Write to Matt Jarzemsky at matthew.jarzemsky@wsj.com
Access Investor Kit for Bank of America Corp.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US0605051046
Subscribe to WSJ: http://online.wsj.com?mod=djnwires