The troubled Fontainebleau resort — which may not be worth more than the debt accumulated to build the project — is likely to change hands in bankruptcy.

WhatÕs uncertain is how the departure of FontainebleauÕs equity owners and the arrival of new owners will affect the fate of the resort, which filed for bankruptcy protection in June.

Creditors have spent the past several weeks fighting over the priority of their claims in bankruptcy court, but the bigger issue for the unfinished resort, and Las Vegas, is whether the building will continue to languish or whether new owners will finish and open it.

As casino resort bankruptcies go, FontainebleauÕs is unique.

Although bankruptcies of ill-financed or badly conceived casino projects have long been part of the Las Vegas landscape, Fontainebleau — the product of an inflated and unsustainable economy — is the largest and most expensive building to enter bankruptcy reorganization as an unfinished project, according to casino and real estate experts. The 4,000-room resort, originally budgeted at $1.5 billion, is expected to cost more than $3Êbillion upon completion.

Therein lies the greatest problem with the Fontainebleau.

Casino companies typically experience few changes to their operations in bankruptcy protection, aside from new owners and investors, because they continue to generate money as they did before and merely use the Chapter 11 court process as a means to reduce their debts.

The 4,000-room Fontainebleau, though mostly complete, might cost another $1.5 billion to finish on top of the more than $1 billion already owed the resortÕs lenders, according to testimony in bankruptcy court.

New owners will need to decide whether it makes financial sense to finish the building or let it sit, unoccupied and unfinished, until the economy rebounds.

Assuming that bank lenders end up in control of the property, they will face a problem with no easy solution.

Banks donÕt like to manage properties and instead will attempt to sell them in a foreclosure proceeding.

Selling the Fontainebleau will be a challenge, according to insiders as well as bankruptcy attorneys involved in the case.

Both Apollo Management and Penn National Gaming have privately expressed interest in the Fontainebleau, insiders say. Other casino companies and their executives, including Steve Wynn, also have looked at the property. (Many Las Vegas casino companies, struggling to shore up their own sorry balance sheets, canÕt afford to assume the propertyÕs debt, much less finish the building. And Wynn, insiders say, took one look at the layout of the FontainebleauÕs already-built rooms and walked away.)

Interestingly, ApolloÕs other casino investments — most significantly, the companyÕs part ownership of HarrahÕs Entertainment — have tanked in the recession. Penn, one of few cash-rich casino giants, has actively sought a presence on the Las Vegas Strip. These companiesÕ interest is speculative because a purchase would make sense only if the debt — including claims by banks with liens on the property and unsecured creditors — is significantly reduced in bankruptcy. ItÕs unknown whether banks would be willing to back a new ownerÕs purchase or walk away without investing a penny more in a money-losing proposition.

Representatives of Apollo and Penn declined to comment.

The bankruptcy judge overseeing the Fontainebleau case, concerned about allowing an empty building to lie in limbo while $4.5 million of the lendersÕ money goes to maintaining the resort and paying its skeleton staff, wants to expedite the process.

In the likely absence of a workable business plan, some observers believe the resort will be liquidated, or sold, at a court-approved auction in the next few months. Some vulture capitalists might be waiting in the wings for this very opportunity in the hopes of picking it up on the cheap. That might not be good news for creditors but might be just whatÕs needed to finish the resort, putting thousands of underemployed contractors back to work.

Then again, one personÕs eyesore is anotherÕs unwanted competition.

Liz Benston can be reached at 259-4077 or at benston@lasvegassun.com.