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LAS VEGAS-The deadline for submitting a qualified bid for the stalled $3-billion, 3,800-room Las Vegas Strip resort development known as Fontainebleau has been set at 5 p.m. PST on Friday, Jan. 15, 2010. The bid must top Carl Icahn’s $156.2-million “stalking horse” bid by at least $1 million. An auction will then be conducted on Thursday, Jan. 21, where qualified bidders will have the opportunity to top whoever has submitted the best bid. A hearing to approve the sale to the best bidder is scheduled for Wednesday, Jan. 27.

Adding intrigue to the proceedings is the Examiner’s intent to allow credit bids, which potentially brings into the fold a group of mechanical contractors who claim to be owed more than $450 million, though about half the total is under dispute. In order to submit a credit bid the mechanics contractors will need the bankruptcy judge to ratify their claim quickly, which means they may only try to have the undisputed amount ratified.

In addition to topping Icahn’s bid by $1 million, any other winning bidder, even a contractors’ bid based on the value of unpaid work on the project to date, would have to include tens of millions in cash in order to immediately pay back the $51.5-million in debtor-in-possession financing included in Icahn’s stalking horse bid as well as several million in financing and deal-termination fees that also would straight go to Icahn. A qualified bidder also will have to show it has the financial wherewithal to complete the project.

Combined, contractors, lenders and bondholders have invested approximately $2 billion in the project to date. Penn National Gaming, which initially offered $102 million for the property with hope of becoming the stalking horse bidder, believes that due to the estimated $1.5-billion cost to complete the project and the amount of revenue it would generate upon opening, the $2-billion already invested is now worth absolutely nothing.

Work was halted on Fontainebleau this summer after final-stage lenders for the project cut off funding, claiming Fontainebleau defaulted on its credit agreement. Term Lenders for the project have objected to contractors’ claims that the money they are owed for their work on the project has priority over that of lenders and bondholders. They also have objected to the allowance of credit bids in addition to all-cash bids, saying it would artificially inflate the price and inhibit all-cash bids. The examiner has disagreed, saying it would do just the opposite.

For recent stories on Fontainebleau, click on one of the following headlines: For previous Fontainebleau stories, click on one of the following headlines, listed in chronological order:

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