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LAS VEGAS-Progress is being made in court-ordered mediation regarding the stalled Fontainebleau resort project here, according to a report filed late last week by the mediator. The court-ordered report states that the focus of the mediation has been on crafting a business solution for completion of the $3-billion development and the release of all claims by all parties, and that mediation should continue.The developer, Miami businessman Jeffrey Soffer, alleges the revolver lenders held back $656 million of its financing commitment without just cause, effectively forcing the project into Ch. 11 bankruptcy. The 63-story, 3,800-room resort now sits approximately 70% complete at the north end of the Las Vegas Strip. Soffer is seeking a summary judgment against the final-stage lenders that would force them to hand over the $656 million.

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 the opposite–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. Earlier this month, it was pushed back to Miami district court. US District Judge Alan Gold in Miami scheduled a hearing on the developer’s motion for summary judgment with respect to the $656.5 million for 5 p.m. this evening [Tuesday, Aug. 18].

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. GlobeSt.com will post the result of tonight’s hearing as soon as it becomes available.

The joint report on the status of the mediation was filed late last week as ordered by Mediator Jeffrey Beck. “Three sessions have involved participation by the parties to this action [the developer and the final-stage lenders], the term lenders and the potential investors, both of whom have made presentations to the defendants [the final-stage lenders] as to their plans for the project and the proposed terms for their investment,” states mediator Jeffrey Beck in his report. “On the basis of the proposals exchanged and discussions held to date, the parties to this proceeding and the mediator collectively believe that progress toward a resolution has been made and that the process of mediation should continue.”

The report mentions “two potential third-party investors” but does not name them. Citing unnamed sources the Las Vegas Sun this week stated that both Apollo Global Management LLC–a private equity firm that owns a piece of Harrah’s Entertainment and is believed to have purchased some of Fontainebleau’s debt–and Penn National Gaming have expressed interest in the project. Soffer himself also reportedly has offered to invest further in the project.

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