Penn National exits bidding for Fountainebleau Las Vegas

The WSJ report quoted a company spokesman as saying that Penn will not participate when bids for Fountainebleau are due Friday in US bankruptcy Court in Miami. That would leave billionaire investor Carl Icahn as the only bidder so far, although other bidders could emerge.

Icahn had reportedly outbid Penn in late November to place a strarting bid of us$ 155 million for Fontainebleau. A subsidiary of Icahn's firm, Icahn Enterprises LP, started a bidding war in court, leading to its so-called "stalking horse" offer of us$ 105 million, plus us$ 51.5 million in debtor-in-possession financing, thereby setting the base price for auction. Other bidders could offer more, and Icahn would have the option of topping those bids.

According to reports, Penn had stopped bidding at us$ 145 million, including us$ 50 million of such financing after its initial offer of us$ 101.5 million, as the company believed the casino-hotel is not worth more than the cost to finish the project at a time when gambling and hotel revenues in Las Vegas have fallen amid the economic downturn. Completing the hotel and casino would require an investment of close to us$ 1.5 billion, according to some estimates.

The us$ 3 billion, 63-story Fontainebleau hotel and casino development on the remote northern end of the Las Vegas Strip had stalled at 70% completion, after revolver lenders, who had agreed to provide final-stage financing for the project, cut off around us$ 800 million in funding last spring. The lenders claimed Fontainebleau Las Vegas LLC had defaulted on its credit agreement.