James Packer's $US250 million ($A315 million) investment in a US casino development company has evaporated after three of its subsidiaries including its Las Vegas arm filed for Chapter 11 bankruptcy protection.
Crown's investment in Fontainebleau Resorts is its largest single investment in the US, aside from the $US320 million it has agreed to pay for a stake in the Cannery Resorts.
The privately owned company has been struggling to stay afloat since April when 11 of its lenders withdrew their $US800 million financing for the company's Las Vegas project.
Its chief executive and co-founder, Glenn Schaeffer, left a month later and was not replaced.
In response to the bankruptcy filing by Fontainebleau yesterday, Crown last night announced that it had written down the investment to nil at the end of the 2008 calendar year.
This contradicted what the company told Bloomberg on June 1, when it denied that the carrying value was nil: "Investments in Fontainebleau, Harrah's and Stations Casino Group have been written down … Crown Limited has never indicated to The Australian Financial Review or to anyone else that the investment in Fontainebleau Resorts has been totally written off."
At the company's half-year result in February, chief executive Rowen Craigie declined to reveal the carrying value of the Fontainebleau investment.
Crown invested $US250 million with Fontainebleau Resorts for a 19.6 per cent stake last year. UBS valued the investment at $A75 million on June 1.
The company is part way through construction of a $US3.5 billion hotel and casino project, complete with apartments and upmarket shops, across the road from the famous Circus Circus casino on the Las Vegas Strip.
The 3815-room mega-resort was due to open in October but is over budget by $US375 million. It is majority owned by Miami developer Jeffrey Soffer.
A spokesman for Fontainebleau's Las Vegas arm told Associated Press that some of its lenders had agreed to let the company use cash during its bankruptcy. It was also in talks to obtain financing to restart construction at the resort.
Crown has had a bad run of luck in trying to break into the coveted Las Vegas market. Attempts to build the world's tallest casino in Las Vegas failed last year due to financing problems and in March, Crown pulled out of a deal to buy the Cannery casino group at the 11th hour, settling instead for a much smaller stake.
Crown had also been burned by its previous investment alongside the Californian private equity firm Colony. It paid $242 million for a 4.9 per cent stake in Station Casinos at the top of the market in 2007, which the company now concedes is "pretty much" worthless.
Station Casinos, which owns 13 casinos in Las Vegas, is teetering on the edge of bankruptcy. (Credit: The Sydney Morning Herald)
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