Bank of America Corp (NYSE:BAC) announced they have settled a $300 million lawsuit filed by lenders over the financing of the Las Vegas Fontainbleu Resort and Casino. The lawsuit was initiated in 2009 and the resort and casino has since filed for bankruptcy protection. BoA had brokered the $1.85 billion credit facility and was accused of funneling the money into Fountainbleu even after it should have seen the signs of financial distress. The original value of the project was estimated to be at around $2.9 billion.
The bank continued to make disbursements even though the global financial crises at the time was putting undue pressure and imperiling the project. The company eventually stopped funneling money into the project once it claims it started to see substantial cost over runs.
The project was located at the end of the famed Las Vegas strip and was also to include a 63-story glass skyscraper. This also included a resort and casino, along with a convention center, restaurants, bars and over 3,800 rooms for rental access.
Among the plaintiffs filing the suit was a hedge fund, Firm Avenue Group, along with private equity firm Carlyle Group LP. The distressed project was eventually purchased by multi-millionaire investor, Carl Ichahn. The bank never released the details of the settlement publicly and its discovery was due to its required inclusion of the bank’s annual report. Bank of America Corp (NYSE:BAC) says that it had set the funds aside for the settlement as early as 2014. Of the stipulations agreed to in the settlement, one was that the current lawsuit be dropped in return for the exchange of payment to the plaintiffs. The plaintiffs released a statement stating they are pleased the lawsuit has no finally reached closure. Bank of America had no comment.
The stock sold off recently but held support above $15.75. The technical have been damaged though and until some stability returns to the chart there isn’t a lot of reason to be in this stock.