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Vol. 7 No. 12, December 2008, Dateline
Credit Crunch Hits Macau
Sands scrambling
The surprise announcement last month that the powerful gaming operator Las Vegas Sands was on the verge of bankruptcy sent shares plummeting even lower. Shares of the company were trading below $6. Just one year ago, shares were going for more than $120. The slumping economy and crushing $10 billion debt load were just some of the reasons that the company is in danger.
Chairman Sheldon Adelson and his family contributed another $525 million to the cause, making his total contribution over the past month $1 billion. The company also announced it was making another stock offering of 182 million shares at $5.50, hoping to raise $2.14 billion.
While the action “saved the company,” according to Bill Lerner, gaming analyst for Deutsche Bank, the Asian jurisdictions where LV Sands is operating were more cautious.
The company announced that it was halting construction on the St. Regis Condominium Tower adjacent to the Venetian and Palazzo in Las Vegas, and that it would also curtail development of the Sands project in Bethlehem, Pennsylvania, and concentrate on getting the casino open while stopping construction on the non-gaming parts of the development. The company is also ceasing construction on several projects in its multibillion-dollar Cotai Strip development in Macau.
At the same time, William Weidner, COO for LV Sands, said the search for even more funding is going forward.
“We are pursuing a project financing with a major Chinese bank,” he said.
Singapore announced that it is considering a joint venture with CapitaLand Ltd. should LV Sands be forced to declare bankruptcy. The $4 billion resort, Sands Marina Bay, is under construction and due to be completed by the end of 2009.
“If Las Vegas Sands cannot cough up its share of equity, the Singapore government is likely to step in,” wrote Donald Chua, an analyst at CIMB-GK, in a report last month. “A viable option could be a 49-51 joint venture between the government and CapitaLand, with CapitaLand taking a controlling stake in the project.”
While CapitaLand said it has not held talks with LV Sands, a company release said it was still seeking investments in the “continuing global recessionary environment.”
“Potential opportunities will be carefully explored and evaluated, ensuring that an acquisition is made only at the right time, right price and when target returns are met given the current difficult economic operating environment,” CapitaLand said.
CapitaLand is a two-time loser in Singapore. The company teamed up with MGM Mirage to bid on the license that eventually went to LV Sands, and then joined with Kerzner International to bid on the city’s second license, on Sentosa Island, that was eventually awarded to Genting.
Chua said that CapitaLand has the capital, but warned about the scope of the development.
“While it is currently well-capitalized, we believe the sheer size of the Marina integrated resort project could pose substantial funding strains,” the analyst said.
In Macau, where 11,000 construction workers were idled, Chief Executive Edmund Ho said the government is prepared for any bankruptcy, without mentioning Las Vegas Sands by name.
“I am not worried about any casino closing down as the government can take over the business temporarily until the economy improves,” he said.
Meanwhile, an apparent clash has developed within the top tier of management at LV Sands. Comments tucked into the company’s 10-Q filing last month outlined some changes in corporate governance. The statement said there is a disagreement between Adelson and some members of senior management on how to resolve the issues facing the company. This “loss of confidence” indicates a split between Adelson and Weidner, who has headed the management team that includes Executive Vice President Brad Stone and Senior Vice President Rob Goldstein for more than a decade.
The changes will mean more involvement by the board of LV Sands in these decisions.
“In these times, it is only prudent to have the board work in closer consultation with senior management,” a LV Sands spokesman said.
“While we believe Las Vegas Sands’ bold vision could ultimately work and the stock may stabilize near-term should it finish its capital raise, we think it will remain an execution story until it can start to deliver on its plans,” Macquarie Capital gaming analyst Joel Simkins told investors.
Chairman Sheldon Adelson and his family contributed another $525 million to the cause, making his total contribution over the past month $1 billion. The company also announced it was making another stock offering of 182 million shares at $5.50, hoping to raise $2.14 billion.
While the action “saved the company,” according to Bill Lerner, gaming analyst for Deutsche Bank, the Asian jurisdictions where LV Sands is operating were more cautious.
The company announced that it was halting construction on the St. Regis Condominium Tower adjacent to the Venetian and Palazzo in Las Vegas, and that it would also curtail development of the Sands project in Bethlehem, Pennsylvania, and concentrate on getting the casino open while stopping construction on the non-gaming parts of the development. The company is also ceasing construction on several projects in its multibillion-dollar Cotai Strip development in Macau.
At the same time, William Weidner, COO for LV Sands, said the search for even more funding is going forward.
“We are pursuing a project financing with a major Chinese bank,” he said.
Singapore announced that it is considering a joint venture with CapitaLand Ltd. should LV Sands be forced to declare bankruptcy. The $4 billion resort, Sands Marina Bay, is under construction and due to be completed by the end of 2009.
“If Las Vegas Sands cannot cough up its share of equity, the Singapore government is likely to step in,” wrote Donald Chua, an analyst at CIMB-GK, in a report last month. “A viable option could be a 49-51 joint venture between the government and CapitaLand, with CapitaLand taking a controlling stake in the project.”
While CapitaLand said it has not held talks with LV Sands, a company release said it was still seeking investments in the “continuing global recessionary environment.”
“Potential opportunities will be carefully explored and evaluated, ensuring that an acquisition is made only at the right time, right price and when target returns are met given the current difficult economic operating environment,” CapitaLand said.
CapitaLand is a two-time loser in Singapore. The company teamed up with MGM Mirage to bid on the license that eventually went to LV Sands, and then joined with Kerzner International to bid on the city’s second license, on Sentosa Island, that was eventually awarded to Genting.
Chua said that CapitaLand has the capital, but warned about the scope of the development.
“While it is currently well-capitalized, we believe the sheer size of the Marina integrated resort project could pose substantial funding strains,” the analyst said.
In Macau, where 11,000 construction workers were idled, Chief Executive Edmund Ho said the government is prepared for any bankruptcy, without mentioning Las Vegas Sands by name.
“I am not worried about any casino closing down as the government can take over the business temporarily until the economy improves,” he said.
Meanwhile, an apparent clash has developed within the top tier of management at LV Sands. Comments tucked into the company’s 10-Q filing last month outlined some changes in corporate governance. The statement said there is a disagreement between Adelson and some members of senior management on how to resolve the issues facing the company. This “loss of confidence” indicates a split between Adelson and Weidner, who has headed the management team that includes Executive Vice President Brad Stone and Senior Vice President Rob Goldstein for more than a decade.
The changes will mean more involvement by the board of LV Sands in these decisions.
“In these times, it is only prudent to have the board work in closer consultation with senior management,” a LV Sands spokesman said.
“While we believe Las Vegas Sands’ bold vision could ultimately work and the stock may stabilize near-term should it finish its capital raise, we think it will remain an execution story until it can start to deliver on its plans,” Macquarie Capital gaming analyst Joel Simkins told investors.
Staff writers for Global Gaming Business magazine. Las Vegas, Nevada.
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