Las Vegas Sands Macau unit faces risk of default on US$3.3b loans
Las Vegas Sands Corp revealed yesterday that its Macau subsidiary faces a risk of default on US$3.3 billion in bank loans from a syndicate that includes Bank of East Asia, Industrial and Commercial Bank of China and Citic Ka Wah Bank.
But last night, the embattled casino developer got a US$525 million investment from the family of its chairman and controlling shareholder, Sheldon Adelson, even as it sought to sell US$1.62 billion more in shares to raise cash.
The firm said that its offering of common stock, preferred shares and warrants was oversubscribed.
The Adelsons agreed to buy 5.25 million shares of preferred stock and warrants to purchase about 87.5 million shares of common stock at an exercise price of US$6 each, Las Vegas Sands said.
About 181.8 million shares of common stock were offered for sale at US$5.50 each. Investors can buy a share of preferred stock plus a warrant to buy 16.67 shares of common stock for US$100.
If plans to raise US$2.15 billion in new capital failed, the company might be in violation of debt-to-cash flow terms of the loan within the next three months, the firm said in a stock exchange filing.
Las Vegas Sands said such a breach of the financing agreement would allow the 29-bank syndicate to begin calling in its Venetian Macao loans.
In addition, it could be unable to provide working capital to its loss-making Hong Kong-Macau ferry business, CotaiJet, and forced to suspend some or all of its remaining global development projects.
The disclosure added to financial concerns at the company, which since July has struggled to avoid defaulting on the US$5 billion in loans carried by its Las Vegas unit.
Mr Adelson in September injected US$475 million of his own money into the firm through a convertible note to avoid a default on the US loan package, which has also been used to help fund expansion in Macau and Singapore.
To prevent a default on US$8.8 billion in loans taken out by its US and Macau units, Las Vegas Sands is raising the new capital.
'While clearly dilutive, we view this event as a 'save the company'-type transaction and expect it would be received favourably,' Deutsche Bank gaming analyst Bill Lerner wrote in a research note.
In addition to raising capital, Las Vegas Sands announced it would curtail US$1.8 billion in global spending, mainly by suspending construction on a US$3.3 billion, 6,400-room Cotai casino complex across the street from the Venetian.
It said attempts to raise US$5.25 billion in loans for Macau projects had failed, confirming an October 20 report in the South China Morning Post.
Instead, the company said it would seek to finance the new Cotai complex on a project basis, possibly with money from a mainland state-owned bank and a Macau government bailout. New financing would allow the group to resume work on the project in the near term.
'We have a term sheet from a Chinese bank that amounts to somewhere between US$500 million and US$700 million out of about US$1.5 billion to US$2 billion in project finance,' Mr Adelson said yesterday.
'Now if we can wrap that up and get help from the government as they have [suggested] in news articles, or they see that the parent company [lending] commitments have been satisfied ... then we'll hardly miss a step.'
Las Vegas Sands reported worse than expected third-quarter results because of shrinking consumer spending in Las Vegas and Beijing's curbs on mainland visits to Macau.
The company reported its third consecutive quarterly loss as interest payments again exceeded operating income. Revenue increased 67.2 per cent from a year earlier after the firm opened the Venetian Macao and Palazzo in Las Vegas, but was relatively unchanged from the previous quarter at US$1.1 billion.
