Fontainebleau Miami Said to Offer Restructuring Plan (Update1)

March 17, 2010, 11:31 AM EDT

 

By Jonathan Keehner and Beth Jinks

March 17 (Bloomberg) -- Fontainebleau Miami Beach owners Dubai World and Jeffrey Soffer, chief executive officer of Turnberry Ltd., offered the resort’s lenders a debt- restructuring plan that includes $100 million of new equity, according to three people with knowledge of the talks.

The Fontainebleau, which served as a backdrop for the “Scarface” and “Goldfinger” movies, borrowed more than $620 million to help fund renovations and hasn’t made loan payments since September, said the people, who asked not to be named because the talks are private. Dubai World, half-owner of the resort, is leading negotiations with lenders, the people said.

Lenders, led by Bank of America Corp., haven’t given final approval to the plan, which would extend senior debt maturities by four years to 2016 and increase loan fees and interest rates, according to one person. Debt holders, including hedge funds Highland Capital Management LP and Five Mile Capital Partners, rejected a previous restructuring plan, the people said.

The Fontainebleau Miami reopened in November 2008, seven months after Dubai World unit Nakheel bought its stake in the property for $375 million, and two months after the collapse of Lehman Brothers Holdings Inc. that triggered the global financial crisis. Miami hotel rates in September were 54 percent below their February 2007 peak, Smith Travel Research said.

‘Victim’ of Collapse

“Fontainebleau Miami is a victim of the collapse in room rates, not of flawed renovation,” said Bill Lerner, an analyst at Union Gaming Group LLC in Las Vegas. “It’s a great hotel reopened at the wrong time.”

A spokesman for Istithmar World, the private-equity arm of Dubai World, said the company believes the resort is a valuable asset with a solid future. Representatives of Fontainebleau Miami Beach, Bank of America and Highland Capital Management declined to comment. Messages left at Five Mile Capital weren’t immediately returned.

The resort, which faces the Atlantic Ocean, now features more than 1,500 rooms, 11 restaurants and lounges and a 40,000 square-foot spa, according to a press release.

The Miami restructuring offer comes after Fontainebleau Resorts LLC, the development firm founded by Soffer, lost control of the bankrupt Fontainebleau Las Vegas in February. Billionaire investor Carl Icahn bought the unfinished casino resort for $156.1 million.

The 63-story Fontainebleau, which sits on about 27 acres at the north end of the Las Vegas Strip, was about 70 percent complete at a cost of $2 billion when it filed for bankruptcy in June.

--With assistance from Nadja Brandt in Los Angeles and Zainab Fattah in Dubai. Editors: Jeff St.Onge, Rob Urban

To contact the reporters on this story: Jonathan Keehner in New York at jkeehner@bloomberg.net Beth Jinks in New York at bjinks1@bloomberg.net.

To contact the editors responsible for this story: Jeff St.Onge at jstonge@bloomberg.net; Alec McCabe in New York at amccabe@bloomberg.net