Fontainebleau Contractors Object to Penn’s Bid
Contractors have objected to the deal struck last week between the developer of the Fontainebleau Las Vegas and Penn National Gaming (PENN: 24.91 0.00%). The agreement has been finalized by the parties involved, however still requires approval from the bankruptcy court.
In a court filing on Friday, a group of contractors who claim to be owed $424 million argued that the sales motion proposed to the Bankruptcy courts earlier in the week, was not written to encourage competitive bids.
Attorneys for the group charged that the terms of the credit agreement made by the gaming company favors the lenders over the contractors and that the $1.5 million separation clause payable to Penn in the event the deal falls through, inhibits the bidding process.
The group of contractors have asked the court to hold a hearing to determine the extent of the asserted liens so they could submit their own credit bid. The group had been looking for financing partners, prior to the agreement, as they feared the bankruptcy auction would not cover their liens.
The agreement has the casino operator paying $50 million for the rights to the project and a debtor in possession loan of $51.5 million. The loan would be forgiven if Penn’s stalking horse bid was to be accepted, however other interested parties would have to secure the loan payment to Penn, in order to take possession.
Penn reserves the right to offer a counter bid if a competitive suitor comes forward.
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