The developer told its lenders in April that it would cost nearly $1.5 billion to complete the project, according to a court declaration filed in bankruptcy court by Henry Yu, senior vice president of Bank of America.

The project already carries nearly $1.7 billion in debt, which would push the project's debt to $3.2 billion upon opening, Yu said.

"It is clear that the project at completion will have liabilities far exceeding its assets" unless the $1.7 billion in existing debt is "compromised," Yu said in the filing.

The banks' arguments will be at issue Monday when Bankruptcy Judge A. Jay Cristol considers Fontainebleau Las Vegas developer's request for a summary judgment against the banks.

The developer sued a group of banks and is asking the court to order them to release the $656 million so work on the project can be restarted.

Construction on the Strip resort was stopped after the developers' filed for Chapter 11 bankruptcy because of the banks' decision to withhold the money.

The banks have said the money was withheld because of concerns the project was in default and having cost overruns.

Fontainebleau Las Vegas' developer has insisted there was no default, and even if there was, that the banks were obligated to provide the committed financing.

"The banks improperly terminated their contractual obligation to lend the money for this project," Fontainebleau said in a statement Thursday. "Nothing they say -- all of which is distorted and wrong -- relieves them of that obligation."

Fontainebleau, which is owned by Miami-based developer Jeffrey Soffer, has said a third party is ready to finance the rest of the project if the banks release the money.

Although that party has not been named, sources say private equity firm Apollo Management could be Fontainebleau's white knight.

Apollo, which co-owns Harrah's Entertainment, completed raising $14.8 billion for its latest investment fund, Apollo Investment Fund VII, in January.

An attorney for the fund has attended some of the Miami court hearings, and the firm has been buying up some of the project's debt at a discount, two sources have said.

The Review-Journal reported June 20 that representatives from Harrah's and Apollo toured the project, which is 70 percent complete.

People familiar with the situation said that if Apollo were to acquire the project, it would be owned separately from Harrah's, although the casino giant would manage and operate the property.

The banks are arguing the developers knew they wouldn't be able to meet their financial commitments months before they requested the $656 million.

Fontainebleau officials told the lenders in April, Yu said, the maximum debt that the project could manage with projected cash flow is $1.4 billion.

The company tried to persuade the holders of a $675 million mortgage note to "extinguish" it and convert a portion of the credit facilities to equity.

"This again confirms the project had been insolvent well before Fontainebleau filed for bankruptcy protection on June 9," Yu said.

Contact reporter Arnold M. Knightly at aknightly@reviewjournal.com or 702-477-3893.

Reporter Tony Illia contributed to this report.