US entrepreneur may have bitten off more than he can chew
An eye-in-the-sky view of the growing casino trade
Neil Gough 14 November 2008
“Yes, there were times, I’m sure you knew, when I bit off more than I could chew.
But through it all, when there was doubt, I ate it up and spit it out”
- Frank Sinatra, My Way
Sheldon Adelson, the founder and controlling shareholder of Las Vegas Sands Corp, is used to having things his way, too.
“An entrepreneur creates a vision,” he told me during an interview in February last year, speaking about his plans for the Cotai Strip.
“In order to make it work the entrepreneur has to have the courage of his own convictions ... I’m investing US$15 billion based upon that conviction.”
Today, there is a lot of doubt out there about Mr. Adelson’s vision for Macau.
He has suffered a paper loss of more than US$30 billion in the past 13 months as investors sold down shares in his company, which last week announced it was facing the risk of loan defaults and bankruptcy.
Macau, where Mr. Adelson’s firm has already spent around US$5 billion developing resorts, has washed its hands of the company’s financial problems. Instead, Chief Executive Edmund Ho Hau-wah said on Tuesday that the government would take over Las Vegas Sands’ casinos in the event the company went bankrupt.
The firm’s largest and longest shareholder after Mr. Adelson, Denver-based Marsico Capital Management, announced last week that it had sold down its stake in the company to 5.4 per cent as of October 31.
That’s about half of the 11 per cent it held just five months ago.
Even his executive team appears to be second-guessing Mr. Adelson, who serves as chairman and chief executive of the company.
Las Vegas Sands said this week that its board of directors had set up a special “executive committee” on October 29 to “address a number of outstanding differences between our chief executive officer and other senior management members, and in response to a loss of confidence by certain senior management members in the management of the company and our governance process”.
Mr. Adelson is doing his best to eat it up and spit it out. He’s injected a cool US$1 billion from his own pocket into the company in two deals over the past six weeks.
The latest, a US$2.1 billion equity sale, is meant to fend off the immediate risk of the company’s Las Vegas unit defaulting on US$5 billion in loans.
But the Macau subsidiary, too, is facing a fresh risk of defaulting on its US$3.3 billion in loans as soon as the first three months of next year.
Las Vegas Sands slashed US$1.8 billion in planned spending, mainly by suspending work on a 6,400-room Cotai casino complex across the street from the Venetian that was supposed to have opened next year.
The record shows they’ve taken the blows, but Las Vegas Sands is not out of the woods yet. The firm still faces a US$900 million outlay in Macau to “prepare the project for delay” and needs another US$600 million-plus to meet its equity commitment to its US$4.99 billion Marina Bay Sands resort in Singapore.
At the same time, its debt-to-cash ratio continues to soar, and interest payments are opening up a widening margin over operating income (see charts).
Mr. Adelson and Sinatra have more in common that just being confident.
Sinatra of course was a regular with the rest of the Rat Pack at the old Sands Hotel in Las Vegas, and at one point owned a stake in the property.
Mr. Adelson later bought the Sands, imploding it in 1996 to build his first Venetian resort and convention centre in an effort to capture the business travel market.
That gambit proved a huge success. But the mountain of debt that Mr. Adelson has wagered on successfully exporting that formula to Macau brings to mind another Old Blue Eyes tune: All Or Nothing At All.
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US entrepreneur may have bitten off more than he can chew
An eye-in-the-sky view of the growing casino trade
Neil Gough
14 November 2008
“Yes, there were times, I’m sure you knew, when I bit off more than I could chew.
But through it all, when there was doubt, I ate it up and spit it out”
- Frank Sinatra, My Way
Sheldon Adelson, the founder and controlling shareholder of Las Vegas Sands Corp, is used to having things his way, too.
“An entrepreneur creates a vision,” he told me during an interview in February last year, speaking about his plans for the Cotai Strip.
“In order to make it work the entrepreneur has to have the courage of his own convictions ... I’m investing US$15 billion based upon that conviction.”
Today, there is a lot of doubt out there about Mr. Adelson’s vision for Macau.
He has suffered a paper loss of more than US$30 billion in the past 13 months as investors sold down shares in his company, which last week announced it was facing the risk of loan defaults and bankruptcy.
Macau, where Mr. Adelson’s firm has already spent around US$5 billion developing resorts, has washed its hands of the company’s financial problems. Instead, Chief Executive Edmund Ho Hau-wah said on Tuesday that the government would take over Las Vegas Sands’ casinos in the event the company went bankrupt.
The firm’s largest and longest shareholder after Mr. Adelson, Denver-based Marsico Capital Management, announced last week that it had sold down its stake in the company to 5.4 per cent as of October 31.
That’s about half of the 11 per cent it held just five months ago.
Even his executive team appears to be second-guessing Mr. Adelson, who serves as chairman and chief executive of the company.
Las Vegas Sands said this week that its board of directors had set up a special “executive committee” on October 29 to “address a number of outstanding differences between our chief executive officer and other senior management members, and in response to a loss of confidence by certain senior management members in the management of the company and our governance process”.
Mr. Adelson is doing his best to eat it up and spit it out. He’s injected a cool US$1 billion from his own pocket into the company in two deals over the past six weeks.
The latest, a US$2.1 billion equity sale, is meant to fend off the immediate risk of the company’s Las Vegas unit defaulting on US$5 billion in loans.
But the Macau subsidiary, too, is facing a fresh risk of defaulting on its US$3.3 billion in loans as soon as the first three months of next year.
Las Vegas Sands slashed US$1.8 billion in planned spending, mainly by suspending work on a 6,400-room Cotai casino complex across the street from the Venetian that was supposed to have opened next year.
The record shows they’ve taken the blows, but Las Vegas Sands is not out of the woods yet. The firm still faces a US$900 million outlay in Macau to “prepare the project for delay” and needs another US$600 million-plus to meet its equity commitment to its US$4.99 billion Marina Bay Sands resort in Singapore.
At the same time, its debt-to-cash ratio continues to soar, and interest payments are opening up a widening margin over operating income (see charts).
Mr. Adelson and Sinatra have more in common that just being confident.
Sinatra of course was a regular with the rest of the Rat Pack at the old Sands Hotel in Las Vegas, and at one point owned a stake in the property.
Mr. Adelson later bought the Sands, imploding it in 1996 to build his first Venetian resort and convention centre in an effort to capture the business travel market.
That gambit proved a huge success. But the mountain of debt that Mr. Adelson has wagered on successfully exporting that formula to Macau brings to mind another Old Blue Eyes tune: All Or Nothing At All.
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