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Sands Pays Off Portion of Debt

Posted on August 20th, 2010

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In a statement made last Wednesday, gambling industry bigwig Las Vegas Sands announced its plans to pay off the company’s outstanding debt amounting to more than $1 billion. This move is due to an amendment that has been announced previously to a credit agency. The Las Vegas-based operator and owner of casinos and resorts, Sheldon Adelson, claimed that the amendment has the maturity of majority of their term loans, amounting to $3.9 billion or 75 percent, extended. The maturity of these loans has now been pushed to 2015 and 2016. By paying the loan, Las Vegas Sands said that it has strengthened its cash position and its entire financial status, aside from giving them the chance to make new investments in other gaming markets outside the United States. The company, which includes in its list of properties major Las Vegas gaming halls such as The Palazzo and The Venetian, anticipates the payment totaling around $1 billion to occur in the latter half of the week.

Now that a substantial portion of the casino company’s debt has been paid off, the remaining term loans that are left unpaid will be subject to LIBOR interest rate plus 2.75 percent. LIBOR, short for the London Interbank Offered Rate, is the rate being charged by international banks for short-term loans of other banks. Term loans that were not extended to form the amendment still amounts to $980 million, which will continue to generate LIBOR interest rates plus 1.75 percent. These loans are set to mature in the years 2013 and 2014. Last month, the casino company stated that their losses in the second quarter have been reduced greatly with the help of two Asian markets – the thriving business in the Special Administrative Region of Macau in China and a new casino resort in Singapore, which has been performing significantly better than expected. The company acquired a $4.7 million dollar loss for the second quarter, or only one cent in every share of the company. This is significantly lower than the loss incurred last year, which was equated to $222.2 million, which amounted to a 34 cent decrease of share value. As for its debts, Las Vegas Sands reported as of June 30 $10.4 billion worth of long-term debt.

News regarding the company has generally been more positive compared to the past years of downturns due to the economic slump and Las Vegas’ generally weak performance. Corporate credit ratings of the company from Standard & Poor’s have been upgraded from a “B-” to a “B” mostly because of the payment, and the rating agency said that it now has a “positive” outlook of the company. A credit analyst of the agency, Ben Bubeck stated that because of the amend-and-extend transaction’s completion, the company’s rating has been upgraded and the debt maturity profile of the company has greatly improved. Furthermore, he said that improvements have also been seen in Las Vegas Sand’s liquidity profile and financial flexibility because the company’s leverage covenant has been eased into 2012. Aside from the properties in Las Vegas, Macau and Las Vegas, Sands also has casinos in Bethlehem, Pennsylvania. For the second quarter, its businesses in Macau and Singapore contributed almost 80 percent of the company’s revenue. As with its stock shares, as of the middle of the week, each share is valued at $30.29, rising by 53 cents, with a high in 52 weeks of $30.47 in earlier trading.

Meanwhile, a gaming analyst from Stifel Nicolaus Capital Markets, Steven Wieczynski, said the company’s next move will probably be to hasten the plans for construction on two more facilities in Macau to be located on Cotai Strip. Plans on this were initially stalled in 2008 following the collapse of the credit market. As soon as the two Cotai Strip casinos will be done, properties of the Sands in the Chinese enclave will rise from three to five. In neighboring Singapore, the recently-opened Marina Bay Sand resort have already posted significant revenues, amounting in $95 million in cash flow in its first 65 days alone. Wieczynski, even though believing that the debt payment has put the Sands in a better position, still warms investors to be a bit cautious in investing in Sands, as he says that expected growth forecasts, especially for the Singapore facility may be still inflated.