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LAS VEGAS-The Fontainebleau Las Vegas bankruptcy judge on Thursday said he’s decided to appoint an examiner to oversee the disposition of the partially completed $3-billion casino-resort development at the north end of the Las Vegas Strip. An order laying out the examiner’s duties is now being drafted; US Bankruptcy Judge A. Jay Cristol in Miami said he will sign the order next week, according to published reports.

Meanwhile, Fontainebleau continues to negotiate a sale price with Penn National Gaming. If it does, the price, expected to be well below a previous $300-million offer, would become the stalking horse bid, according to the reports by the Las Vegas Sun and Reuters. A stalking horse bid is one that other interested purchasers would have to top in order to be considered by the examiner.

With no update on sale negotiations from Fontainebleau and a motion from the lenders to convert the reorganization to a liquidation, Judge Cristol last week ordered both sides to his courtroom to show cause why he shouldn’t appoint an examiner, which he said would cost substantially less and result in a quicker sale than the Ch. 7 liquidation process.

Fontainebleau attorneys reportedly argued against the appointment of an examiner, saying while quicker than the liquidation process it could slow the sale process currently underway. Term lenders, who hold the bulk of the projects debt, spoke in favor of the examiner because it would make for a more transparent process. Previously they argued that the main individual behind Fontainebleau, Miami developer Jeffrey Soffer, was conflicted due in part to his being both a debtor and a creditor in the process.

In arguing against the examiner this week Fontainebleau attorneys gave more detail on the sale negotiations and said Soffer had recused himself from the process. Judge Cristol apparently wasn’t moved, having been quoted in the Las Vegas Sun as responding that without an independent examiner, “Nobody’s going to believe [Soffer's] not running the show.”

The potential Penn National deal would include $16 million in debtor in possession financing that would allow Fontainebleau to repay the term lenders their costs to finance the bankruptcy case and provide some funds for stabilizing the project including needed work on the roof and replacement of some windows, according to the Las Vegas Sun. The potential deal includes a financial incentive for the buyer to complete the project for less than $1.5 billion as well as a 3% break-up fee of the undisclosed purchase price, according to the newspaper.

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