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Moody’s Investors Service cut credit ratings on casino operator Las Vegas Sands Corp. two notches further into junk territory Wednesday, citing its high debt load and negative trends in Las Vegas, while praising plans to raise capital and trim development spending.
At the corporate level, the agency cut several ratings, including the probability of default, to “B2” from “Ba3.” Some $5 billion in credit facilities issued to the company’s Las Vegas subsidiary were cut to “B2” from “Ba3,” while $3.3 billion in facilities issued to operations in the Chinese gambling enclave of Macau were cut one notch to “B2” from “B1.”
The agency said the ratings are on review for possible further downgrade, especially if a $2.1 billion capital raising program the company announced Monday did not come to fruition. It is set to close Friday.
“Failure to successfully raise adequate new capital, even with the significant reduction in capital spending plans, would likely result in a covenant default and could jeopardize the company’s ability to continue as a going concern,” analyst Keith Foley said.
If the capital raising program succeeds, it is “expected to alleviate concerns related to liquidity and covenant compliance.”
Along with the capital raising plan, the company said Monday it would halt the development of three casinos and two hotel towers in Macau, a condo tower in Las Vegas and the non-casino portions of a complex in Bethlehem, Pa.
Singapore Won’t Bail Out Las Vegas Sands’s Project in City
Singapore’s government won’t bail out the casino-resort being built by Las Vegas Sands Corp. in the city-state’s downtown, said Senior Minister of State for Trade and Industry S. Iswaran.
Las Vegas Sands and its Singapore unit Marina Bay Sands hasn’t sought a bailout from the government, he added. The government’s tourism board said Oct. 29 it’s in talks with the company to “facilitate” the success of the Singapore resort. The stock rose 80 percent after the statement.
“There have been no requests for a government bailout from Marina Bay Sands and neither does the government intend to do one,” Iswaran said, according to a transcript of his comments to reporters in Singapore today.
The success of Las Vegas Sands’s project is crucial for the city-state, which is counting on two casino-resorts to help double visitor arrivals and triple tourism spending by 2015. The Las Vegas casino operator said yesterday it will get a $525 million investment from the family of Chief Executive Officer Sheldon Adelson and plans to sell $1.62 billion more in shares to raise cash and avoid bankruptcy.
“This has always been a commercial project,” Iswaran added. “The fundraising that Marina Bay Sands has done is an example of what they need to do in this environment in order to strengthen their balance sheet and be able to fund the relevant projects and they have to do some prioritization and that is what they have been doing and I think it is the right thing.”
The casino operator said Nov. 10 it will halt construction in Macau, where it earns two-thirds of revenue, to focus on its $4 billion Singapore project.
Adelson, who owns about two-thirds of the company, was ranked the third-richest man in the U.S. by Forbes magazine before the shares tumbled 95 percent this year. The casino owner needs the cash to avoid violating the terms of some U.S. loans and triggering defaults that may force it into bankruptcy.
Singapore mulls phased opening for Las Vegas Sands
Singapore said on Wednesday it may let Las Vegas Sands (LVS.N: Quote, Profile, Research, Stock Buzz) open its casino in the city-state in phases from the end of 2009 instead of all at once due to the difficult economic conditions.
U.S. casino operator Las Vegas Sands this week raised about $1 billion to shore up its finances and said it would halt or delay projects in Macau and the United States to conserve cash. [ID:nN11518067]
The firm said, however, that it would continue work on the planned Marina Bay Sands casino resort in downtown Singapore, which is expected to cost nearly $5 billion.
Marina Bay Sands “had earlier committed to completing the integrated resort in a single phase by end-2009. However, it recently submitted a proposal for a progressive opening from end- 2009 onwards,” the Singapore Tourism Board (STB) said.
“STB is considering the proposal.”
The board also said Las Vegas Sands will invest about $500 million in additional equity to ensure the Singapore project is completed.
The Marina Bay Sands, which will form part of the extension to Singapore’s central business district, will comprise a casino, hotels, convention and retail space as well as various entertainment facilities.