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Las Vegas Sands Seeking Club Loan, Buffer Cash (LVS)

Posted on | November 21, 2008 Time: 10:08 am |

Reuters ran a story this morning with sources stating that Goldman Sachs (GS) is in talks to put together a syndicate loan for Las Vegas Sands subsidiary Venetian Macau Ltd., to the tune of about $1 billion. According to the story, the loan would be based on the lots 5 & 6 on the Cotai developments, which strike me as a bit strange. (for more on Cotai, peruse “LVS - Thoughts on 2009 Sustainability“)

If LVS was able to get financing with those assets as collateral, there could be time constraints as to when construction would have to start back up. CEO Sheldon Adelson’s claims on the lands aren’t even that solid to begin with. I was expecting to see a $1b or so deal on Canal Shoppes retail properties, but it’s quite likely that commercial real estate is a complete logjam right now.

I still see a funding gap of between $500m and $1b, but I am still of the belief that Adelson & Co. can pass 4th quarter covenants, which should take some of pressure off to rush a deal. Based on the LVS’s existing term loan in the secondary market, financing costs are going to be 11% or higher. Ouch.

Stock Price Reflects?

Shares are down another 18% today, and now go for about 40% less than the secondary offering just one week ago. It’s hard to parse how much of that is market-driven, but this is quickly becoming a binary investment thesis - the current equity (now a scant $1.14 billion) makes it, or it doesn’t.

Casinos have often proven to be relative safe havens during recessions, but the global loss of wealth (either realized or on paper) this time around is truly unprecedented. I don’t know how Macau will hold up over the next few months. Critial mass of facilities is getting close to fruition, but this is the worst time in history to be “ramping up” offerings. Investments here continue to have high upside, and 100% downside.

Ryan Barnes

disclosure: author does not hold position in LVS.

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Comments

2 Responses to “Las Vegas Sands Seeking Club Loan, Buffer Cash (LVS)”

  1. The Market Traders
    November 30th, 2008 @ 5:07 am

    Which Companies Are Set to Benefit from the Obama Response?…

    Ryan Barnes submits:I just finished listening to Obama’s press conference announcing the new economic team, and the market seems generally disappointed by the lack of juicy details. We wanted to hear how big the stimulus package would be, and we …

  2. Is a Consensus Forming Around Las Vegas Sands’ Sustainability? (LVS) : Epiphany Investing
    December 11th, 2008 @ 3:24 pm

    [...] lights into 2009, but still saw a general shortfall of $300m - $500m, which may be raised via a syndicate loan on retail properties or Macau land parcels. The market seems to be coming around to a future where LVS equity survives, [...]

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