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Banks criticised for walking away from massive US project

Developers of the $3 billion Fontainebleau casino resort on the Las Vegas Strip have filed a lawsuit against 11 lenders including Bank of America, JPMorgan Chase, Merill Lynch Capital, Barclays Bank, Bank of Scotland and others.

They are seeking recovery of the money they need to finish the project which was promised by a variety of lenders. They claim they are unlikely to be able to secure funding from elsewhere in the current recession.

'Without these funds, which cannot be replaced in today's economic environment, the project cannot be finished and will never open,' said Fontainebleau attorney Steve Morris in the complaint filed in Clark County District Court. 'Construction will cease, contractor liens will accrue and revenues from the project will never be realized,' he continued.

The complaint alleges that the lenders notified Fontainebleau developers on April 20 that they had terminated their agreement to provide an $800 million revolver loan because of one or more unspecified defaults by Fontainebleau. But the developers say they haven't defaulted on any part of their agreement.

The lawsuit notes that lenders charged in the lawsuit collectively received tens of billions of dollars in federal bailout money that was meant to increase the flow of credit. The banks would not comment on the legal suit.

However politicians are not happy at a time when they are encouraging banks to lend to the property industry. Senate Majority Leader Harry Reid, criticised the banks.

'It is wrong, plain and simple, that the banks named in the lawsuit are trying to back out on their commitment to this important project,' he said.

'When banks, especially ones that have received taxpayer dollars, make a commitment to finance a worthy project with thousands of existing jobs on the line, they have an obligation to keep that promise. "I hope this can be resolved quickly because thousands of families are counting on it and so is Nevada's economy,' he added.

From the outside the towers look finished but there is still a massive amount of work to be done inside and thousands of jobs are depending on the development finishing on time. Fontainebleau officials said work is nearly 70% complete on the 24-acre, 63-storey project, and an opening date of October had been expected.

Spokesman Lance Ignon said the developers have $130 million cash on hand to fund the project as they figure out how the rest of construction will be funded. Ignon said the company is actively negotiating with other lenders to try to secure alternative funding if the existing deal crumbles completely.