About 30 floors of the 63-story tower anchoring the developmenthave been fully completed and require air conditioning, while thetop of the building is largely without a roof. Penn's offerdisclaims liabilities for Fontainebleau's existing financialburden, which includes an estimated $1.6 billion in bank loans andbondholder debt, and several hundred million of contractors' liens,claiming the project's value is no longer worth any more than theestimated $1.46-billion cost to complete the project. The agreementcalls for a vast majority of the existing contracts and leasesrelated to the project to be rejected.

"Despite the impressive scale of that building, our view is itsvalue is little to nothing because the cost to complete [theproject] is at the edge of its value in our judgment," PennNational chief executive Peter Carlino told analysts last month."And around that we have a very, very, very disciplined sense ofwhat we will accept and what we will not, and so it kind of goesour way or it doesn't. It's as simple as that. We chase nothing,we'll stretch for nothing and this process will play out or itwon't."

A stalking horse is meant to prevent "low-ball" offers. Inexchange, Penn National gets the inside track and a guarantee via abreak-up provision that its expenses will be repaid if it loses outto another buyer. As the stalking horse, Penn National's bid wouldbe the standard by which any other bids to purchase the projectwould be evaluated. Other interested bidders who submit qualifyingoffers would be permitted to participate in the auction. BothFontainebleau and Penn National are asking the bankruptcy court toapprove the offer, set a bid deadline of Jan. 15, 2010, and anauction date of Jan. 21, 2010.

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