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LAS VEGAS-Fontainebleau Las Vegas’ lawsuit against Bank of America and the other lenders that were supposed to fund completion of the $3-billion resort here is being moved from bankruptcy court to federal district court. The order by US District Judge Alan Gold in Miami was in response to a motion by the so-called “revolver lenders,” which reneged on their commitment to provide $656.5 million in final-stage financing for the 63-story, 3,800-room resort, which now sits approximately 70% complete at the north end of the Las Vegas Strip.

Fontainebleau alleges the revolver lenders held back financing commitment without just cause. The revolver lenders contend they had the right to back away from the commitment. At issue is whether Fontainebleau defaulted on its loan agreement—Fontainebleau claims it did not and the lenders claim it did—and whether a default was grounds for not providing the final-stage financing and ultimately canceling the lending agreement. For more background on the dispute, click here.

The lawsuit was initially filed in Clark County District Court in April. It was subsequently moved to federal district court in Las Vegas and then dropped altogether by Fontainebleau in order to be re-filed in Miami bankruptcy court as part of its Ch. 11 bankruptcy case.

The revolver banks’ argument for removing the lawsuit from bankruptcy court was that it is not an important part of Fontainebleau’s reorganization plan and is more closely related to a related lawsuit filed against the revolver banks by the term lenders who with the developers have funded the project to this point. In addition, the revolver banks argued that any ruling by the bankruptcy court would be subject to review by the federal district court, so the move would shorten the process.

The defendants in the lawsuit are Bank of America, its subsidiary Merrill Lynch Capital Corp., JPMorgan Chase Bank, Barclays Bank PLC, Deutsche Bank Trust Company Americas, the Royal Bank of Scotland plc, Sumitomo Mitsui Banking Corp., Bank of Scotland plc and HSH Nordbank AG. In June, Fontainebleau and the defendants were ordered by the bankruptcy judge to try mediation, which was set for early July.

Per Gold’s order, a hearing on Fontainebleau’s motion for summary judgment with respect to the $656.5 million is set for Tuesday, Aug. 18, according to court filings. A joint report on the status of the mediation is due before Thursday, Aug. 13.

Fontainebleau’s $1.85 billion in construction financing for the project was through three senior secured credit facilities: a $700 million seven-year maturity term loan, a $350 million six-year maturity delay draw term loan and an $800 million revolving loan. Bank of America, in addition to being one of the revolving (final-stage) lenders, is also the administrative agent for the credit agreement.

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