Friday 7 November 2008

Sands at Risk of Violating Covenants

Ailing casino giant Las Vegas Sands Corp. warned it could violate debt covenants and its ability to continue in business is in “substantial doubt” if it doesn’t succeed in raising new capital to ease mounting financial pressure.

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Guanyu said...

Sands at Risk of Violating Covenants

By Tamara Audi, WSJ
7 November 2008

Ailing casino giant Las Vegas Sands Corp. warned it could violate debt covenants and its ability to continue in business is in “substantial doubt” if it doesn’t succeed in raising new capital to ease mounting financial pressure.

Sands is evaluating the future of its global development projects, according to a filing Thursday with the U.S. Securities and Exchange Commission. It has massive development projects under way in Singapore, Pennsylvania, Las Vegas and Macau, China’s gambling enclave.

Concerns about the company have grown in recent months. Its Las Vegas properties have been hit hard by the economic slowdown, and it has struggled to raise a total of $5 billion to refinance existing debt, and fund $1.9 billion of new construction in Macau.

Sands says it will likely be in violation of its debt covenants for the fourth quarter ending Dec. 31, which could result in lenders accelerating repayment of loans. Sands stock dropped 33%, or $3.81, to $7.85 in 4 p.m. composite trading on the New York Stock Exchange.

The company, run by billionaire Sheldon Adelson, has already said it is working with a financial adviser to seek a cash infusion to help steady the situation. Analysts said Sands is close to a deal that would pump cash into the company through major investors.

The filing also indicates it may postpone several big future projects, some of which are already under construction, they said. One possible candidate is a $600 million condo project under construction in Las Vegas.

Company spokesman Ron Reese declined to comment on the filing. The company hasn’t yet filed its third-quarter results and hasn’t said when it would do so.

Mr. Adelson, who owns a 70 percent stake in the company, has already contributed $475 million of his own money through the purchase of senior convertible notes to keep the company from violating its debt ratio earlier this year. Mr. Adelson”s wealth, however, has been greatly diminished as the value of his stake in the company has plummeted from a whopping $36.4 billion last October to $1.9 billion today.

People familiar with the company say it is focused on finishing the Singapore project, which is financed and nearer to completion than the other projects. The government of Singapore also recently reiterated its support.