Lehman sues Fontainebleau entities amid $400 million loan guarantees

By Caroline Salls

Pittsburgh, Feb. 11 - Lehman Brothers Holdings Inc. filed a lawsuit Thursday to recover damages based on retail debt secured by a series of written guarantees executed by Fontainebleau Resorts, LLC and its indirect owner Jeffrey Soffer, according to a filing with the U.S. Bankruptcy Court for the Southern District of New York.

According to the complaint, Fontainebleau Resorts, LLC, Fontainebleau Las Vegas Holdings, LLC, Fontainebleau Las Vegas, LLC, Fontainebleau Las Vegas Capital Corp., Fontainebleau Las Vegas Retail Parent, LLC, Fontainebleau Las Vegas Retail Mezzanine, LLC and Fontainebleau Las Vegas Retail, LLC engaged in ongoing construction and development of a casino hotel resort in Las Vegas.

The Fontainebleau entities sought funding for the resort component of the project from Bank of America, NA.

Lehman was the administrative agent on the $315 million of retail senior loan financing and lender on the $85 million of mezzanine financing for the retail component.

Fontainebleau Resorts, LLC and Soffer are named as defendants in the lawsuit because they guaranteed payment of the mezzanine loan.

Lehman said the resort borrowers, which included Fontainebleau Resorts, LLC, defaulted on their loan. All of the resort borrowers, except Fontainebleau Resorts, LLC and Soffer, subsequently filed for Chapter 11 bankruptcy on June 9, 2009. The retail borrowers filed for bankruptcy on Nov. 25.

Lehman said the bankruptcy filings constituted events of default under the resort and retail loan documents.

Lehman said it accelerated payment of the retail loan on Oct. 21, but no payment had been made as of Thursday. In addition, Fontainebleau Resorts, LLC and Soffer have not satisfied their guarantee obligations.

New York-based Lehman Brothers Holdings Inc. was the fourth-largest investment bank in the United States. The company filed for bankruptcy on Sept. 15, 2008. Its Chapter 11 case number is 08-13555.

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