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Vegas Developers Say Banks Won’t Lend Bailout Money

LAS VEGAS (CN) - The developers of the Fountainebleau Las Vegas, a high-rise construction project on the Las Vegas Strip, say several banks that recently received "tens of billions" in federal bailout money refused to fork over $800 million to finish the job as promised in a "vain attempt to escape their obligations." Developers say the move could halt construction of the $3.1 billion project and leave thousands without work.

Fontainebleau Las Vegas claims in its lawsuit in Clark County Court that the banks sent them a letter on Monday stating they would not honor their commitments based on "one or more" unspecified "events of default."

Fontainebleau maintains there has been no default, and says the termination "is nothing more than the banks' baseless attempt to walk away from the project and abandon their obligation."

Fontainebleau also claims that many of the banks recently got "tens of billions of dollars" in federal bailout money intended to "ensure that these banks would begin lending again, and would continue to lend, rather than further constricting the flow of credit that is absolutely critical for any economic recovery."

The banks' decision to back out could force developers to stop construction, and could leave about 3,300 construction workers - plus an additional 1,700 future workers during the finishing stages of the project - without work, the lawsuit states.

The mega-resort is expected to create 6,000 full-time jobs and another 2,000 elsewhere in the Las Vegas Valley when completed, according to the lawsuit.

"All of these sources of employment will vanish as a result of the banks' breach, a further blow to a local economy that ... is in 'freefall,'" the complaint states.

Listed as defendant banks are Bank of America,; Merrill Lynch Capital Corp.; JPMorgan Chase Bank; Barclays Bank; Deutsche Bank Trust Co. Americas; The Royal Bank of Scotland; Sumitomo Mitsui Banking Corp. New York; Bank of Scotland; HSH Nordbank; Camulos Master Fund; and MB Financial Bank.

The Fontainebleau is represented by Steve Morris with Morris Pickering.

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