Where does a business handcuffed by a covenant that caps debt at 7.5 times cash flow go when it needs more money? If it's Las Vegas Sands (NYSE: LVS), it reaches into the bulging pockets of major shareholder and chairman Sheldon Adelson. According to The Wall Street Journal, Adelson has loaned Las Vegas Sands almost half a billion dollars.
The move will allow the company to remain within the covenant of its current $5 billion facility, which is crucial as it looks to raise an additional $2 billion for ongoing projects and refinance a current $3.3 billion loan. Earlier this month, S&P lowered the company's credit rating to B+ from BB-, reflecting weakness in the gaming industry and illiquidity in the company's position.
Traditionally, the large casino-based companies have looked to investment banks for project financing (ouch!) and LVS continues to press forward on plans to build not just in Macau, but other Far East markets such as Singapore and perhaps Taiwan. Even before the current tight money climate in the U.S., though, LVS and other major players in the Far East casino development business have been looking overseas for financing.
Finding that funding has been made more difficult by less than stellar returns from Macau (see Sand Macau's revenues were down 30% in the second quarter) and malaise in Las Vegas, where slot income was down a billion dollars last year.
The company's stock has been on an appalling downward slide since September of 2007, when it peaked at over $140 a share. It has tumbled another $4 today, to under $33 a share. It appears that investors aren't heartened that Las Vegas Sands had to tap its own major stockholder for funding. The stock drop has sucked even more of Adelson's money out of his pocket.
I suspect Las Vegas Sands will need some good news, such as increased revenues, before investors will be eager to once again roll the dice on its shares.
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Reader Comments (Page 1 of 1)
10-02-2008 @ 2:52PM
CynC said...
Good for him for having enough guts and the belief in his company to put his money where his mouth is. How many other CEO's would be willing to bail their own jobs out. Not any on Wall Street, that's for darn sure!
10-02-2008 @ 2:57PM
stew said...
the picture is of the venetian hotel. the sands hotel was razed years ago.
10-03-2008 @ 7:14AM
Perry said...
He is a great CEO capable of turning his economic problem into a long range solution.
He at least was smart enough not to loan money to Sub-Prime applicants.
Not much of a gamble for an industrious man such as Mr Adelson.
11-05-2008 @ 8:21PM
Glenn said...
Not only is Sheldon Adelson a brilliant businessman but is a good man who cares about the people that work for him. Not one team member has been laid off at this point and the only loss of money is on paper and LVS is still worth Billions.