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Las Vegas Sands Set to Finance Singapore Casino

The Sands will take on more long-term debt to develop its successful bid for a Singapore casino.

Las Vegas Sands is looking to finance the newly-won $3.2 billion bid for Singapore's first casino in much the same way the Macau project was, sources close to the talks revealed. That would have the effect of more then tripling the $1.625 billion long-term debt that the Las Vegas, Nevada-headquartered company carried on its books at the end of 2005. Such a deal has already caused Standard and Poor's to announce a cautionary CreditWatch rating.

The Sands had won the bid in May 2005 against consortia led by MGM Mirage (MGM), Harrah's Entertainment Inc. (HET) and Malaysia's Genting International of Genting Highlands fame.

To be built on the reclaimed Marina waterfront site by 2010, this will be the third property the Sands will have gained in Asia. The company earned its first successes in Macau, opening a casino-convention center in 2004 and a looking to finish a resort-casino next year.

The Marina resort-casino will include conference halls, performance venues and a luxury hotel.

At stake for Singapore is the continuing effort to diversify a resource-poor economy long dependent on petroleum, low value-added manufacturing, moribund shipbuilding and regional headquarters for multinationals. The island-state has therefore consistently pitched tourism. In 2005, however, tourism arrivals inched up a relatively anemic 7%.

In April 2005 the government announced that a second resort-casino should be built on Sentosa, a minuscule island-resort, also by 2010. No fewer than ten countries across East Asia have casinos, with Japan reportedly set to joi8n the pack. Most such casinos attract locals of Chinese ethnicity as well as droves of tourists from Hong Kong, Taiwan and mainland China. Last year, arrivals from People's China in Singapore drooped by 2.5% versus the prior year.

Just as it did for the second Macau property, the Sands is reportedly keen on packaging a mix to include long-term project financing, revolving credit and a floating rate note. The $2.5 billion then comprised a $1.2-billion funded term B loan, a $700-million delayed draw term B loan, a $100-million local currency term loan and a $500-million revolving credit facility.

The size of the deal has attracted an even dozen banks, up from nine previously, mostly offering stand-alone proposals rather than as part of a consortium. Informed sources have identified Citigroup, Lehman Brothers and Goldman Sachs Group as among those eager to participate. William Weidner, chief operating officer of the group, reserved comment on both the package and which banks had the inside track.

The Sands closed 2005 reporting total liabilities of $2.27 billion, $1.625 billion of which was long-term debt. If project financing for Singapore were to be closed and drawn this year, that and the new Macau loan would have the effect of at least tripling long-term liabilities for the group.

This prospect may have led Standard & Poor's Ratings Services to issue a "CreditWatch with negative implications" rating on Las Vegas Sands Corp. and subsidiaries Las Vegas Sands LLC and VML U.S. Finance LLC, despite announcement of the successful Singapore bid. Such a rating is preparatory to either affirmation or further downgrading on completion of Standard & Poor's review.

In April, on the other hand, Mr. Weidner had floated the prospect of raising up to $1.44 billion in a share sale. "…Sands could fund between 10 percent and 40 percent of the investment with equity," he enthused.

 

Thursday, September 07 , 2006
Edward O'Connor