By Beth Jinks
Nov. 11 (Bloomberg) -- Las Vegas Sands Corp., the casino company run by billionaire Sheldon Adelson, said it’s raising $2.14 billion in capital and is suspending construction in Macau to conserve cash after a third-quarter loss.
The casino operator expects to finish the “oversubscribed” sale of debt or equity this week, including contributions from the Adelson family, removing the risk of the parent company tripping loan covenants, executives said yesterday on a conference call. A “major Chinese bank” may also lend the company as much as $700 million to resume the stalled Macau projects, Adelson said.
Las Vegas Sands needs the cash to avoid violating the terms of some U.S. loans and setting off a series of defaults that may force it into bankruptcy. The company said yesterday it will halt work on developments in Macau, where it earns two-thirds of revenue, to focus on the $4 billion Singapore project.
“They’re weak on a number of levels, with return on capital at 3.3 percent, significantly below their cost of capital,” Roy Ophir, director of research at financial research and asset management company Matrix Lighthouse LLC, said in a phone interview today. “From a free cash flow perspective, they’re burning cash.”
The ratio of the Las Vegas-based company’s total debt to total capital was 80 percent in June, according to data compiled by Bloomberg.
Shares Slide
Las Vegas Sands fell 6.3 percent to $7.50 after the close of New York Stock Exchange composite trading.
The owner of the Venetian and Palazzo casino resorts has lost 92 percent of market value this year on investor concerns that falling revenue and the financial meltdown will leave it short of cash to fund expansion projects or repay loans. It was usurped as the world’s largest casino company by market value in the past month by Wynn Resorts Ltd.MGM Mirage is second biggest.
The suspension of construction work in Macau “is good for the casino market” as visitor growth slows, Billy Ng, a Hong Kong-based analyst at JPMorgan & Chase Co. said in a phone interview.
Macau had 2.31 million visitors in September, 10 percent less than in August and the lowest number since July 2007.
Las Vegas Sands also said it will stop work on its Las Vegas condominiums and parts of its Bethlehem, Pennsylvania project.
Casino Expansion
Adelson’s company, Wynn Resorts Ltd. and MGM Mirage have been expanding outside their home market as gambling revenue on the Las Vegas Strip declined for eight straight months.
Las Vegas Sands will issue a prospectus “within days,” executives said on the call, declining to say whether it will sell debt or equity.
The company extended the deadline for finishing parts of Marina Sands in Singapore into 2010. The casino, two hotel towers, parts of the mall as well as meeting and convention areas are to open as scheduled by the end of 2009.
Las Vegas Sands has pledged to invest at least $12 billion building casinos in Macau, where casino gambling revenue has more than doubled since 2004 to 83 billion patacas ($10.4 billion) last year.
Macau Revenue
Macau’s casino gambling revenue was 26 billion patacas in the third quarter, 10 percent lower than the previous three-month period, amid the economic slowdown caused by the credit crisis and measures by the Chinese government to restrict its citizens’ travel to the city. Macau, the only place in China where casinos are legal, is a special administrative region and Chinese from the mainland need a visa to enter it.
Still, compared with the third quarter last year, Macau’s casino revenue grew 28 percent.
The Singapore casino may house 1,000 gambling tables, 67 percent more than earlier planned, Las Vegas Sands said. It expects the Singapore project to deliver earnings before interest, taxes, depreciation, amortization and rent of $1.26 billion in 2012.
Las Vegas Sands posted a third-quarter loss of $32.2 million or 9 cents a share, compared with a loss of $48.5 million or 14 cents in the previous year.
Excluding items such as development costs and a loss on the sale of some assets, Las Vegas Sands’ earnings per share were 2 cents. That missed the 10-cent average estimate of 18 analysts surveyed by Bloomberg.
Adelson, who owns about two-thirds of Las Vegas Sands, injected $475 million Sept. 30, hired Goldman Sachs Group Inc. to help raise more capital and said he would participate in the financing. The company made a filing with regulators Nov. 6 to allow it to quickly sell stocks or bonds if it finds investors.
The Macau government is “encouraging” Chinese banks to lend Las Vegas Sands the money it needs to continue the half-finished phases 5 and 6, Adelson said on the call.
Adelson met with Singapore government officials last week, and pledged to complete the $4 billion project there. Hong Kong and Macau bankers are also discussing financing for his Macau projects, said two people involved in the transaction.
To contact the reporter on this story: Beth Jinks in New York at bjinks1@bloomberg.net; Kelvin Wong in Hong Kong at kwong40@bloomberg.net
Posts
No comments:
Post a Comment