Owner of the Venetian casino warns on debt woes
Shares of Las Vegas Sands Corp., owner of the Venetian hotel and casino, are plummeting today after the company warned that it could face bankruptcy.
The firm, controlled by billionaire Sheldon Adelson, is deep in debt and strapped for new capital, at a time when casino traffic is dwindling as consumers slash their spending.
From Bloomberg News:
The casino owner, which had $8.8 billion in long-term debt at the end of June, said in a regulatory filing today that it probably won't meet the requirements of some loans unless it cuts spending on development projects, boosts earnings at its Las Vegas Strip casinos and raises more capital.
The reversal of fortune is a black eye for the 75-year-old Adelson, who was once America's third-richest man on the strength of his Las Vegas Sands holdings. The company's dwindling cash flow is threatening $16 billion worth of developments in Macau, China, and Singapore, where Las Vegas Sands is building resorts to cater to wealthy Asian gamblers.
Spending declines on the Vegas Strip and restrictions on visas in Macau have stemmed the flow of cash into Las Vegas Sands. Today's admission comes after Adelson, who holds a stake of more than 64%, invested an additional $475 million in September and hired an investment bank to raise more capital with his help.
Some analysts make the point that today’s filing shouldn’t be a shock to Wall Street. Las Vegas Sands shares fell as low as $4.95 last month as debt concerns mounted. The stock then rallied back to $14.19 by Oct. 31 as some investors moved back in.
But on another awful day on Wall Street, no one wants to hear a company warn that a trip to bankruptcy court is possible, even if the warning is boilerplate.
Las Vegas Sands was down $3.84, or 33%, to $7.82 at about 10:50 a.m. PST, after falling as low as $6.52 earlier. The stock peaked at $144.56 in October 2007.
Photo: Sheldon Adelson. Credit: Kin Cheung / Associated Press
Las Vegas Sands has some real, fundamental problems that go well beyond any convenants in their agreements.
First, Sands made a huge bet on Macao, based on the assumption that millions of Chinese would flock there to gamble. The visa restrictions imposed by China on travel to Macao put a big crimp in the economic viability of that bet.
Second, the Venetian and Palazzo in Las Vegas are bottomed on the convention and meeting business. This business will surely decline as the tsunamis set lose by the credit freeze batter retail, distribution, and manufacturing sectors of our economy. Venetian and Palazzo will have greater declines than the rest of the industry because their customers tend to believe that they have been gouged by prices that are much higher than what they would pay in the open market for the same rooms and for the same services. Customers lost are not likely to return as readily as to other properties.
Third, The Sands Convention Center is not as attractive as the newer convention space, which means that the Sands convention center will lag behind other properties when recovery does occur.
Posted by: Leric Goodman | November 06, 2008 at 12:06 PM
THERE IS ONLY ONE MAJOR PROBLEM WITH BOTH THE VENETIAN
LAS VEGAS AND AT MACAO - SIMPLY SHELDON ADELSON...... THE
WORLD'S BIGGEST BLABBER MOUTH WHO HOODWINKED INNOCENT
SHAREHOLDERS TO INVEST IN SCHEMES ABOUT WHICH HE KNEW LITTLE OR NOTHING.... IF ANYONE SHOULD BE INVESTIGATED BY THE SEC - IT SHOULD BE ADELSON...ANYONE ATTEMPTING TO HELP HIM RAISE MORE CAPITAL CAN ONLY LOSE THEIR SHIRTS JUST AS OTHER STAKEHOLDERS HAVE.. WHY DOESN'T HE USE HIS
OWN MONEY - CHEAPSKATE ?
Posted by: Frederick Pittera | July 08, 2009 at 05:24 AM