See Updates Below – Carl Icahn was successful in his previous venture of acquiring and selling Southern Nevada casino properties. In February 2008 he sold the Stratosphere, Arizona Charlie’s Boulder, Arizona Charlie’s Decatur, and Aquarius Casino Resort (Laughlin) to a private equity firm led by Goldman Sachs for $1.3 billion, approximately $1 billion above the purchase prices.
Two other bids were not qualified. Following a January 27 hearing in U.S. Bankruptcy Court in Miami, it is expected the court will approve Icahn’s $156.2 million bid for the Las Vegas Fontainebleau. Penn National had expressed interest in the property and reportedly increased its bid to $145 million after Icahn’s attorney’s announced an offer of $136 million. Icahn increased his offer by $20.5 million and Penn dropped out.
Not just a deal maker and acquisition specialist, he is a smart operator, evidenced by turning the unprofitable Stratosphere around, increasing it’s value in the market. Icahn recently re-entered the casino industry as the largest single equity holder in the restructured Tropicana Entertainment (no connection to the Las Vegas Tropicana), which will exit bankruptcy early next year.
His company now owns eight casinos, mostly riverboats in the Midwest as well two properties in Laughlin and one in Lake Tahoe (MontBleu). He also led a group of investors in March that acquired the Tropicana Atlantic City for $200 million at auction. The property will be part of Tropicana Entertainment, which has its corporate headquarters in Las Vegas.
February 20, 2010 – Speculation and expert analysis by Bill Lerner of Union Gaming on Carl Icahn’s timetable, Las Vegas doesn’t need more room inventory right now, Deutsche Bank’s plans for the 3000 room Cosmopolitan, and Echelon’s future in the Las Vegas Sun: Fontainebleau Sitting Idle Benefits Strip’s Economy
February 18, 2010, Icahn Takes Over Fontainebleau’s Las Vegas Hotel
Investor Carl Icahn took ownership of the unfinished Fontainebleau Las Vegas Resort on Thursday, paying its bankrupt owner about $104.6 million in cash.
Icahn also forgave about $49 million in debtor-in- possession financing as part of the deal, according to Scott Baena, bankruptcy counsel at Bilzin Sumberg to the company.
The Fontainebleau filed for bankruptcy protection last June after lenders cut off access to nearly $800 million of construction funds. The 3,800-room casino resort, toward the northern end of the Las Vegas Strip, has already cost $2 billion.
February 11, 2010, Las Vegas Sun: Lehman Brothers Seeks Millions In Suit Against Fontainebleau Developer
Bankrupt investment bank Lehman Brothers Holdings Inc. on Thursday sued Fontainebleau Las Vegas resort developer Jeff Soffer and one of his companies, seeking to recover hundreds of millions of dollars lent for the bankrupt Las Vegas hotel-casino.
Since the Fontainebleau Las Vegas project is being purchased by investor Carl Icahn for only $156.2 million, creditors owed some $2 billion are likely to recover little of what they are owed.
Lehman Brothers, however, in two lawsuits filed in Lehman’s New York bankruptcy case Thursday, isn’t going after Fontainebleau Las Vegas.
Instead, the defendants are Soffer and his Fontainebleau Resorts LLC company. Lehman Brothers is seeking to enforce guarantees it says Soffer and Fontainebleau Resorts signed to obtain two loans for the Las Vegas project.
In one lawsuit Thursday, Lehman sought to enforce guarantees for a loan of $85 million to finance construction of the retail component of Fontainebleau.
“To date, no payment has been made to Lehman under the ‘retail mezzanine loan,’” the complaint says. “The mezzanine payment guaranty allows Lehman to seek full repayment if the retail mezzanine borrower files petitions for bankruptcy.”
The lawsuit says that with interest, $129.3 million is due on the loan.
Thursday January 28, Here’s the view from Miami, the home of the U.S. Bankruptcy Court hearing, Turnberry, and Fontainebleau developer Jeffrey Soffer. The Miami Herald reports: Carl Icahn Sscoops up Fontainebleau Vegas Project
Billionaire Carl Icahn will pay 8 cents on the dollar for the bankrupt Fontainebleau Las Vegas, a project with a $2 billion construction tab. The response from developer Jeff Soffer: The financial world turned on me.
The Miami Beach resort, a separate corporate entity, was not involved in the Vegas bankruptcy. But Soffer’s legal team is girding for creditors from Vegas to pursue the Miami Beach hotel as an asset tied to the Vegas debts.
Soffer did not attend Wednesday’s hearing in federal bankruptcy court in Miami, but in an interview he stood behind his Vegas venture.
“It’s a great project. Long-term, it’s going to be great,” Soffer said. “Hopefully, it will get finished.”
The project filed for bankruptcy in June after banks cut off construction funding, citing overruns and other alleged problems. Soffer blamed the Vegas project’s woes on the collapse of its main lender, Lehman Brothers, and other problems tied to the global banking crisis.
“When the world turns on you, it’s hard,” Soffer said. “Some things are out of your control. That’s the way life is.”
No creditors objected to the Icahn sale, though contractors and lenders continue to press court fights against each other and the Soffer entities that backed the project.
Contractors claim more than $600 million in unpaid bills, and lenders are out more than $1 billion.
Of Icahn’s purchase fee, roughly $45 million was used to fund the bankrupt project in its remaining months — money that mostly went to lawyers’ fees.
Bob Charbonneau, a Miami lawyer representing Vegas contractors, stood near the front of the emptying courtroom after the hearing.
“We end up with $105 million to distribute,” he said, “and a lot of blood on the floor.”
Thursday January 21, Las Vegas Sun: Carl Icahn Group Gets Licensing to Run 3 Nevada Casinos
In a unanimous vote, commissioners agreed to license Tropicana Entertainment to operate the Tropicana Express and River Palms casinos in Laughlin and the MontBleu in Stateline.
There are a lot of opinions as to what will happen after he takes control. Allegedly construction permits are in the application process, but that may be only to secure the building (see below).
Video - Inside the Fontainbleau
Wednesday January 20, The Las Vegas Sun reports: Carl Icahn to Take Ownership of Fontainebleau Las Vegas Resort
Carl Icahn is expected to take over ownership of the bankrupt Fontainebleau Las Vegas resort after two potential competitors vying to buy the property failed to submit qualifying bids as of a 5 p.m. deadline Friday. One of the competing bidders said his bid was shot down by an independent examiner appointed to oversee the sale of the resort.
Icahn – known for his strategy of buying depressed assets in down cycles – is one of few investors able to immediately dip in his pocket in any economy. (With an estimated net worth of $9 billion, Icahn is ranked No. 43 on Forbes’ list of the world’s wealthiest people.)
On Saturday January 6, the Las Vegas Sun examined the options: Will a Big Wager on Fontainebleau Pay Off?
Some experts think it will cost $1.5 billion just to finish the resort, on which construction stopped in the summer after lenders pulled $800 million in financing in the worsening economy and forced the property into a bankruptcy filing.
Fontainebleau is believed to be the most expensive, half-built building in the nation. That’s uncharted territory for any buyer, including Icahn.
Icahn has maybe three options.
• He could spend the $1.5 billion that Penn National Gaming — a company that pulled out of the running early in the bidding process — estimated it would take to finish the job. Penn did months of homework investigating the project and crunching numbers on what it would take to generate a profit on the resort. That kind of money, the company said, would yield a luxury resort the caliber of Mandalay Bay — nicer than most but no Wynn Las Vegas. Outfitting the property on the cheap and filling it with chains like Cheesecake Factory and Outback Steakhouse, while nice restaurants, wasn’t going to do it for Penn.
• Icahn could spend less than that to complete the building. Some observers have theorized that subcontractors might agree to finish the building at lower rates given that some money is better than none. Cost cutting, when done with a deadline and a finely tuned blade, might yield a more cost-effective structure.
• Third, he could opt to not finish the building and simply sit on his purchase, biding time until the economy improves. That might be the most cost-effective strategy, but it might be the worst outcome for Las Vegas because it would add to its recession-fueled blight. Across Las Vegas Boulevard, the former site of the New Frontier and the future site of the Echelon resort sit vacant, gathering tumbleweeds.
And yet, there’s an argument to be made against opening new hotel rooms. Fewer resorts could be good for Las Vegas because it would mean less competition for visitors.
Icahn, who gives few interviews, isn’t talking about his plans for Fontainebleau.
