Las Vegas Sands signals it may not survive downturn
Casino company’s shares tumble on bankruptcy fears
By William Spain 7 November 2008
CHICAGO -- Shares of Las Vegas Sands Corp. crumbled more than 33% Thursday and another 11% Friday after the casino company said it will likely violate debt covenants this quarter, raising the specter that it might not survive the current economic crisis.
In a filing with the Securities and Exchange Commission, Sands -- controlled by billionaire Sheldon Adelson -- told regulators that the size of its debt is now above the agreed maximum leverage ratio. If it can’t drum up more financing, the company said it could well default on its IOUs as its cash flow is “insufficient to cover fixed charges.”
Shares of Sands plummeted $3.81 to close at $7.85 on Thursday and then gave up an additional $1.13 to $6.03 by the end of the Friday session. The stock had been rebounding lately on hopes that Adelson and his family would pump some of their own money to fund ongoing developments and operations at what was once a high-flying company. After running up to as high as $150 last year, the stock cratered at $4.32 last month.
Other gambling stocks, including MGM Mirage, Wynn Resorts Ltd., Boyd Gaming Corp. and Penn National Gaming Inc. also have seen their share prices hit the skids, though none has fallen quite so far and so fast as Sands.
Adelson controls almost two-thirds of the stock and has lost billions of his net worth over the last year.
The company’s auditors, PricewaterhouseCoopers LLP, said in a filing that if Sands does default on debt covenants, lenders could demand to be repaid sooner -- something that “raises substantial doubt about the company’s ability to continue as a going concern.”
The economic meltdown has battered Las Vegas particularly hard as customers are staying away and the ones who do visit are spending less. In addition, Sands’ properties in Macau have been hurt by new restrictions on visas for gamblers arriving from mainland China.
Further, casino operators rely on huge loans to fund aggressive expansion plans, and the credit crisis has all but dried up the money tap, forcing companies like MGM Mirage and Boyd to postpone or scale back some of their more ambitious development projects.
“The good times for the gaming industry are over -- at least in the short-term outlook,” said Joseph Weinert, a senior vice president at Spectrum Gaming, an industry consultancy. “As we see with Las Vegas Sands, even the titans of the industry are having to make major concessions with respect to their financial structures, development plans and operations. This industry is not for the timid right now.”
Sands’ financial crunch also called into question the future of the company’s multibillion-dollar project in Singapore, but Adelson said Friday that it’s still on track.
“When we were selected to develop a [resort] at Marina Bay, we made a commitment to the Singapore government and the people of Singapore,” he commented. “In light of recent turmoil in the global markets, I felt the need to personally reaffirm our commitment to the success of Marina Bay Sands. I am pleased to say that the Singapore government’s support of our project remains strong.”
Late Friday, Sands said it has tapped Kenneth Kay to be its chief financial officer effective Dec. 1. Kay comes to the company from commercial real estate giant CB Richard Ellis Group Inc. , where he has had been chief financial officer since 2002.
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Las Vegas Sands signals it may not survive downturn
Casino company’s shares tumble on bankruptcy fears
By William Spain
7 November 2008
CHICAGO -- Shares of Las Vegas Sands Corp. crumbled more than 33% Thursday and another 11% Friday after the casino company said it will likely violate debt covenants this quarter, raising the specter that it might not survive the current economic crisis.
In a filing with the Securities and Exchange Commission, Sands -- controlled by billionaire Sheldon Adelson -- told regulators that the size of its debt is now above the agreed maximum leverage ratio. If it can’t drum up more financing, the company said it could well default on its IOUs as its cash flow is “insufficient to cover fixed charges.”
Shares of Sands plummeted $3.81 to close at $7.85 on Thursday and then gave up an additional $1.13 to $6.03 by the end of the Friday session. The stock had been rebounding lately on hopes that Adelson and his family would pump some of their own money to fund ongoing developments and operations at what was once a high-flying company. After running up to as high as $150 last year, the stock cratered at $4.32 last month.
Other gambling stocks, including MGM Mirage, Wynn Resorts Ltd., Boyd Gaming Corp. and Penn National Gaming Inc. also have seen their share prices hit the skids, though none has fallen quite so far and so fast as Sands.
Adelson controls almost two-thirds of the stock and has lost billions of his net worth over the last year.
The company’s auditors, PricewaterhouseCoopers LLP, said in a filing that if Sands does default on debt covenants, lenders could demand to be repaid sooner -- something that “raises substantial doubt about the company’s ability to continue as a going concern.”
The economic meltdown has battered Las Vegas particularly hard as customers are staying away and the ones who do visit are spending less. In addition, Sands’ properties in Macau have been hurt by new restrictions on visas for gamblers arriving from mainland China.
Further, casino operators rely on huge loans to fund aggressive expansion plans, and the credit crisis has all but dried up the money tap, forcing companies like MGM Mirage and Boyd to postpone or scale back some of their more ambitious development projects.
“The good times for the gaming industry are over -- at least in the short-term outlook,” said Joseph Weinert, a senior vice president at Spectrum Gaming, an industry consultancy. “As we see with Las Vegas Sands, even the titans of the industry are having to make major concessions with respect to their financial structures, development plans and operations. This industry is not for the timid right now.”
Sands’ financial crunch also called into question the future of the company’s multibillion-dollar project in Singapore, but Adelson said Friday that it’s still on track.
“When we were selected to develop a [resort] at Marina Bay, we made a commitment to the Singapore government and the people of Singapore,” he commented. “In light of recent turmoil in the global markets, I felt the need to personally reaffirm our commitment to the success of Marina Bay Sands. I am pleased to say that the Singapore government’s support of our project remains strong.”
Late Friday, Sands said it has tapped Kenneth Kay to be its chief financial officer effective Dec. 1. Kay comes to the company from commercial real estate giant CB Richard Ellis Group Inc. , where he has had been chief financial officer since 2002.
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