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Nov. 07, 2008
Copyright © Las Vegas Review-Journal

THE STRIP: LV Sands in danger of default?

Analysts say SEC filing not out of ordinary

By HOWARD STUTZ
REVIEW-JOURNAL

The financial health of Las Vegas Sands Corp. took a sudden downturn Thursday when the casino operator told investors it was in danger of defaulting on some of its loans, raising the possibility the company could be facing a date in bankruptcy court.

Wall Street analysts, however, cautioned that the language in the company's filing with the Securities and Exchange Commission may have been ordered by auditors. Some speculated that Las Vegas Sands will come up with a capital plan to restore the faith of investors.

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    • Shares of the company, traded on the New York Stock Exchange, fell more than 25 percent when the markets opened and continued sliding. Las Vegas Sands closed the day at $7.85, down 3.81, or 32.68 percent. More than 54 million shares of the company were traded, five times the average daily volume.

    The company's stock was as high as $148.76 more than a year ago before a more than 90 percent decline. It had returned to double-digit prices in the past week until Thursday.

    "No doubt, this development is adding to the unprecedented volatility in Las Vegas Sands stock," Susquehanna gaming analyst Robert LaFleur said in a research note. "We expect this volatility will continue until clarity of Las Vegas Sands' financial situation emerges."

    In its filing, Las Vegas Sands said it was in jeopardy of missing certain financial covenant requirements and needs to raise more capital.

    The company disclosed a letter from its auditor, PricewaterhouseCoopers, in which the accounting firm wrote that a default would raise "substantial doubt about the company's ability to continue as a going concern."

    LaFleur called the filing language "scary," but he said it was "standard boiler-plate Sarbanes-Oxley."

    Deutsche Bank gaming analyst Bill Lerner thought Las Vegas Sands' management would "imminently announce a specific capital plan and adjust various development projects."

    The operator of The Venetian and Palazzo on the Strip and three properties in Macau had $8.8 billion in long-term debt at the end of June. The company said that it probably won't meet the requirements of some loans unless it cuts spending on development projects, boosts earnings on the Strip and raises capital.

    Las Vegas Sands is building a $675 million casino in Pennsylvania and a $600 million condominium tower on the Strip. In Macau, the company plans to spend $12 billion on its Cotai Strip master-plan. Las Vegas Sands is also building a $4 billion resort in Singapore.

    Spending declines on the Strip and restrictions on visas in Macau have stemmed the flow of cash into Las Vegas Sands.

    In the SEC filing, Las Vegas Sands said if the company was not able to raise the necessary capital "we would need to immediately suspend portions, if not all, of our ongoing global development projects and consider other alternatives."

    Las Vegas Sands had similar debt covenant problems at the end of September. However, Chairman and Chief Executive Officer Sheldon Adelson and his wife loaned the company $475 million through a 6.5 percent convertible note due in 2013.

    Adelson, 75, the company's founder, controls almost 65 percent of Las Vegas Sands' outstanding shares personally and through family trusts.

    Considered America's third-richest person earlier this year, Adeslon fell to 15th on the Forbes list after Las Vegas Sands' stock price lost more than 90 percent of its value. At the end of October, a New York compensation consulting firm estimated Adelson's net worth had fallen by more than $16.6 billion for the year.

    Last month, the company said Adelson and his family had planned to take part in a capital-raising program with an unnamed investment banking company.

    "Sheldon still has considerable resources and we doubt he will sit on the sidelines and watch Las Vegas Sands go bankrupt," LaFleur said. "The question is how much dry powder does he have, and what can he do?"

    Morgan Stanley gaming analyst Celeste Mellet Brown said it remains to be seen what role Adelson will play in the capital-raising efforts.

    "If he does not (participate), the company may have a very difficult time getting the financing completed given its debt load, and the stock could decline significantly," Brown said. "If he does (or puts in all the capital himself), we think the stock will trade higher, even if a capital raise is dilutive."

    Jefferies & Co. gaming analyst Lawrence Klatzkin dismissed the filing as "no new information."

    Las Vegas Sands also filed a shelf registration with the SEC that gives it the option to raise capital through debt, stock or other financial vehicles.

    The Associated Press and Bloomberg News contributed to this report. Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871.

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    badboy wrote on November 08, 2008 01:53 AM: What have you naysayers contributed to people except sitting on chat boards with your endless negativity. Say what you want about Sheldon Adelson...but I guarantee none of you have ever worked for him. If you had, you would know that he treats his employees superior to, I would challenge, any Company in America.


    Joo Tube wrote on November 08, 2008 12:49 AM: Once a Joo, always a Joo. You cannot take the Joo out of the Joo. Sheldon the Joo took a dump on his wife's head and then threw a glass of lemonade in her face.

    He Joo.


    bob wrote on November 07, 2008 08:46 PM: why not sale all these crappy 747,737 that are registered in Bermuda... and stop paying 546,200.00 a year for his personal security..


    ex gambler wrote on November 07, 2008 02:58 PM: I remember a few years back Adelson wanted to disband the LVCA. He felt that Las Vegas no longer needed a government entity to accomplish what he was quite capable of handling himself (he wanted all the convention business). Now, had we listned to his greed, the Las Vegas convention industry would be in dire straits with limited facilities and customers having to pay a high a price for those facilities. Is that what las Vegas needs now? Less competition to keep prices high? Perhaps, that is the crux of our problem here in Las Vegas. Competition has all been eliminated (the Strip is controlled by Harrahs and MGM/Mirage and the locals market is controlled by Stations and Coast) and the little guy, who is the bread and butter of any industry, has been priced out of action. Las Vegas has noone to blame but itself for its greed. Unfortuneately, it is the employees who bare the brunt of bad decesions.


    Joe Bama wrote on November 07, 2008 01:28 PM: He will let Michelle ob-tch win at blackjack so he can get a fed bailout


    casinocon wrote on November 07, 2008 11:37 AM: Sheldon needs to shut down expansion in Singapore and put up his own money to save his company . . . oops, I forgot, a guy like him would declare bankruptcy, screw over employees, investors, and creditors and take his money and run. That's just the kind of guy he is . . . bankruptcy is emminent.


    Rob L wrote on November 07, 2008 10:55 AM: Dave,

    Maybe he did put in the loan that he gets paid first but the bottom line is he own 65% of the common stock and if they go BK, he may get his $475m back but his other $29b in common is gone. He is 65% of the "little guy" you are talking about.

    As for this hatred of corporations that has been stoked in the past few years, please tell me where your paycheck comes from? I am the furthest thing from an Adelson fan but this guy employs 28,000 people. His efforts (and his cash) have provided a livelyhood to thousands yet he is now despised. Its just amazing to me how far we have sunk in this country. We used admire those who had a vision and become successful because of it. Now, we hate them and try to take their money to give to those who have no motivation to even work, let alone create work for others. Its really a sad state of affairs.


    VegasMob wrote on November 07, 2008 10:18 AM: Wow, now I know why your name is "Slick"..
    You're a real sharpie!


    Slick wrote on November 07, 2008 09:51 AM: f--u--c--k the investors and their mothers.


    Dave wrote on November 07, 2008 09:16 AM: Rob L...your facts are a bit off as well. Adelson LOANED the company $475 million. I am sure he has convenants, should the company default, that allow him to get paid first. The problem I have with these rich folk is they hire lawyers and accountants to set the terms so they get paid first and the little guy gets what's left. Just ask the folks at Lehman Bros, Enron and numerous other failings how they did. I don't trust any big corporation. Now may not be tyhe time to invest in Sands. You may be holding useless paper after the dust settles.


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