Las Vegas Sands Conducts Massive Offering; Should Raise $1.5B (LVS)
Posted on | November 11, 2008 Time: 4:22 pm |
In one of most dilutive offerings we’ve seen in some time, casino & resort operator Las Vegas Sands today announced a major restructuring effort aimed at staving off the breaching of key loan covenants in the 4th quarter.
The massive offering includes the issuance of 181.8 million shares of common stock, and a package including 5.2 million shares of 10% preferred and warrants to purchase 86.6 million common shares at $6 apiece. There were only 355 million shares of LVS in existence yesterday, so the common stock offering alone represents a full 33% dilution to current shareholders.
The selling price of $5.50 is an astonishing 31% below yesterday’s close of $8.00; the only salve for investors who have been around this stock the past few weeks is that they have become accustomed to daily moves of 30% or more.
More Dilution to Come
In addition to the immediate, known dilution, we will see further implied dilution through the warrants package, which allows investors to purchase roughly 87 million shares at $6.00, a price that can be assumed to hold in any situation outside of future bankruptcy.
Adelson Ponies Up Again
For those who haven’t been following this Vegas-worthy storyline over the past few months, CEO and 70% owner Sheldon Adelson already had to pony up $450 million on the last day of the company’s third quarter to prevent breaking loan covenants then.
Today, in conjunction with the deal announcement is a separate agreement between LVS and Adelson, whereby Adelson will exchange his 6.5% convertible notes due 2013 into common shares at the investor-equivalent price of $5.50/share. Adelson will also purchase warrant/preferred packages on similar terms to those listed above, which represents another $525 million personal investment from the Adelson family.
Parting Thoughts
There’s a lot of moving parts here, and not as much in the way of precedent. Is this deal good for shareholders? On the surface it would appear “no”, but Las Vegas Sands was running very low on options. In a world where high-risk lending is in hibernation at best, casino operators with massive debt loads in the middle of a spending binge aren’t going to even get through the door.
LVS stock has been doing battle with the prospect of $0 equity value for some time. Removing part of that fear could by itself be enough to drive the stock higher, as the property values alone are well above the enterprise value of the company. Earnings were reported last night, and I have yet to pore over the numbers the way I’d like to. I will certainly keep you updated as I continue to assess the cost of capital and “survivability” metrics for Adelson & Co. But you’ve got to give Adelson credit; he’s keeping his skin in the game right along with shareholders.
disclosure: author does not hold positions in the securities mentioned
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