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LAS VEGAS-Owners of the multi-billion-dollar Fontainebleau resort under construction on the Las Vegas Strip supplemented their project funding lawsuit on Tuesday, claiming lender Deutsche Bank AG is “seeking to destroy” the project in order to minimize competition with Cosmopolitan, another more expensive resort project under construction on the Strip that the bank took control of last year after the developer defaulted.

“To that end, Deutsche Bank has sought to persuade other Revolver Banks to breach their commitments and has worked aggressively to discourage other Revolver Banks from working out their differences with Fontainebleau,” states the amended complaint. “In so doing, Deutsche Bank has breached the covenant of good faith and fair dealing that is implied by law in every contract that, like the loan agreement here, is governed by New York law.”

Fontainebleau Las Vegas LLC filed a $3-billion lawsuit against 11 lenders in Clark County District Court in April, alleging they have went back on contractual commitments to provide nearly $800 million in revolver financing needed to complete the 3,800-room resort, heretofore on track to open this fall on 24 acres at the north end of the Las Vegas Strip. The developers and term lenders have already have invested more than $2 billion of debt and equity in the 63-story project.

The revolver lenders notified Fontainebleau developers on April 20 that they had “terminated” their agreement to provide the revolver loan due to one or more “events of default” that were not specified, according to the complaint filed on April 23. The developers say they haven’t defaulted on any part of the agreement, and note in their lawsuit that some of the defendants collectively received tens of billions of dollars in federal bailout money meant to increase the flow of credit in addition to tens of millions in fees related to their financing commitment.

Deutsche Bank had committed to providing 10% of the $800 million in revolver financing. The German bank has said the allegations are “meritless” and meant only to “distract” from the fact that the loan covenants have been breached.

Fontainebleau Las Vegas is approximately 70% complete and scheduled to open in October. The 24.5-acre project, located across the Strip from Circus Circus, is expected to include nearly 300,000 square feet of retail, a 353,000 square foot convention center, a 60,000-square-foot spa, a 3,200-seat performing arts theater and a large rooftop pool and club scene. Fontainebleau Las Vegas LLC is a joint venture between Las Vegas casino executives and privately held condominium developer Turnberry Associates, which has an adjacent multi-tower residential development.

A Fontainebleau spokesperson told GlobeSt.com in late April that the developer has $130 million in the bank, which based on the court filing should keep the project on track for the next two or three months. There are currently 3,300 construction workers on the site and an additional 1,700 will be needed to finish the project, to be followed by 6,000 full-time workers once the resort is up and running.

“We are not asking for anything special, merely that the revolver banks fulfill the commitment they made to fund this project,” Fontainebleau Resorts LLC executive chairman Jeff Soffer said in April. Fontainebleau’s local attorney Steve Morris wrote in the complaint that the previously committed financing cannot be replaced in today’s economic environment and that without it the project will never be finished. “Construction will cease, contractor liens will accrue and revenues from the project will never be realized,” he wrote.

The lenders named in the lawsuit are Bank of America, JPMorgan Chase, Merrill Lynch Capital Corp., Barclays Bank PLC, Deutsche Bank Trust Company Americas, Royal Bank of Scotland PLC, Sumitomo Mitsui Banking Corporation New York, Bank of Scotland, HSH Nordbank AG, Camulos Master Fund LP and MB Financial Bank NA. The list does not include one revolver lender with a $10 million commitment that is in FDIC receivership and is therefore not part of the suit. The named banks’ counsel hasn’t yet responded to the complaint.

The project financing includes two term loans and the revolver loan. Fontainebleau Las Vegas is represented by Morris Peterson of Las Vegas and Kasowitz, Benson, Torres & Friedman LLP of New York. The complaint states that the term lenders have met their obligations. The terms of the loans have not been made public.

“The term banks funded their $1 billion [commitment to Fontainebleau],” Marc Kasowitz told GlobeSt.com sister publication AM Law Litigation Daily recently. “It’s outrageous that the revolving banks stepped away from their $800 million obligation.”

In late April, Deutsche Bank AG said it took a $653-million charge against earnings in the first quarter to reflect the declining value of the Cosmopolitan, a $3.9-billion casino-resort project that went vertical in April 2007 and is now scheduled to open late next year, one year later than originally planned.

Initially only the lender on the project, Deutsche Bank began foreclosure proceedings in January 2008 after Cosmo Senior Borrower LLC, the Ian Bruce Eichner entity that was the original owner and developer of the property, defaulted on its $760-million construction loan that it could not refinance amid the credit crunch.

The Cosmopolitan development site is a small lot between the Bellagio and the under-construction CityCenter development, both of which are owned by MGM Mirage. The Cosmopolitan project includes two high-rise condo-hotel towers with approximately 2,000 condo-hotel units and 1,000 straight hotel rooms, 641,850 square feet of back-of-house area and 522,934 square feet of public areas above subterranean parking. Approximately 1,800 units are said to be under contract.

In September, Nevada Property One LLC, an affiliate of Deutsche Bank, bought the resort out of foreclosure for approximately $1.44 billion, inked a “guaranteed maximum price contract” with Perini Corp. to complete construction and tapped Related Cos. to oversee the work. Perini has been working on the project from the beginning. In January, the bank won a two-year extension of its waiver from standard parking requirements for the development.

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