Adelson Loans $475M to Las Vegas Sands

LAS VEGAS-Las Vegas Sands Corp. received a $475-million loan from its chairman Sheldon Adelson this week that helped the company meet liquidity requirements, according to a Wednesday filing with the SEC. The investment was made the same day the company said its US senior secured credit facility and furniture, fixtures and equipment credit facility required it to comply with certain financial covenants, including one to maintain a maximum leverage ratio of net debt to trailing twelve-month EBITDA (net cash flow).

Analysts applauded the move but it did not appear to help the company’s share price, which ended Wednesday at $31.32, down 13.27% on the day, and was off by another 13% in afternoon trading on Thursday, taking its share price to $27.23. Part of the concern is believed to be the company’s ongoing need to refinance a multi-billion dollar loan that is coming due and find billions more to complete multiple projects in Macau.

Shares of Las Vegas Sands have fallen 77% from late September 2007, when the company’s share price stood at approximately $120. The company is not alone. MGM Mirage, Boyd Gaming and Pinnacle Entertainment have all seen their share prices fall approximately 70% over the past year and several others – Wynn Resorts, Penn National Gaming, Ameristar Casinos — have seen their share prices fall by approximately 50%.

A gaming index that includes all those companies has fallen 44% since hitting a high of 667.09 in October 2007. The index was launched in 1998 with a value of 100. Including a 10% drop this past month, the Applied Analysis gaming Index now stands at 371.91 and is expected to head even lower in October.

“The latest pull-back in the financial markets has many institutions conserving cash, impacting an already-tight capital market,” Applied Analysis principal Brian Gordon says. “Wall Street remains concerned about gaming operators’ ability to weather the storm and comply with debt covenants going forward. Concerns regarding pricing of future borrowings in this capital-intensive industry have investors moving toward the sidelines. Elevated interest charges for highly-leveraged operators, particularly those that financed privatizations, could be problematic.”

Adelson’s loan was in the form of preferred stock that will pay 6.5% interest over five years. In a similar move, fellow gaming executive Steve Wynn last month paid $4 million in fees in order to maintain its interest rates and had loan covenants altered to help Wynn Resorts maintain its debt-to-cash-flow ratio while also being able to borrow additional money to complete Encore at Wynn Las Vegas, according to SEC filings and published reports.

Next up is MGM Mirage, which is trying to raise an additional $500 million so it can complete a $3-billion bank financing for its five-tower, 19 million-sf Citycenter project that is under construction and scheduled to open all at once in late 2009. In August, company executives told analysts that the project had received commitments for a little more than half of that total from the lead banks — Bank of America, Royal Bank of Scotland, UBS, BNP Paribas, and Sumitomo Mitsui — and additional, smaller commitments from Deutsche Bank, Morgan Stanley, and the Bank of Nova Scotia.

Robert Baldwin, MGM Mirage chief design and construction officer, told analysts that once the full financing is in place the JV will have spent approximately $4.2 billion of the estimated $9.1 billion of gross cash construction and preopening costs, leaving approximately $5 billion needed to complete construction. Minus the $3 billion in bank financing, that leaves an additional $2 billion in costs that will be split evenly between MGM Mirage and its 50-50 partner, Dubai World. In order to complete obtain the remainder of the $3 billion financing commitment, MGM Mirage and Dubai World may have to put in more than $2 billion.

The actual gross cost of Citycenter is $11.2 billion. In its first quarter report, MGM Mirage pegged the net project budget at $8.5 million–after an expected $2.7 billion in residential sales. The gross project budget includes $9.2 billion for construction costs (including capitalized interest), $1.7 billion for the land, $200 million for pre-opening expenses and $100 million of “intangible assets.” As of August, Baldwin said 54% or 1,421 of the 2,700 condominiums have been sold for $1.75 billion.

Boyd Gaming solved the construction financing issues for its $4.8-billion Echelon development by halting the 87-acre project a full year into construction. The move, announced two months ago, marked the first time in decades that a project on the Las Vegas Strip had been shut down after breaking ground.

The developer of the M Resort, Spa & Casino in Henderson, NV, solved its financing problems before financing became a problem, leaving the $700-million project fully funded and on track for its early 2009 debut. Anthony Marnell III, the developer, told GlobeSt.com in August, shortly after the topping-out ceremony, that all necessary financing and fixed-price construction contracts have been in place since the start of construction.

MGM is a partner in M Resort by way of a $160-million subordinated convertible note it provided in April 2007. MGM Mirage has the right to convert the note into a 50% equity interest in the M Resort after 18 months of the note’s issuance if not previously repaid. Marnell told GlobeSt.com that MGM will indeed be a 50-50 partner in the project by the time November rolls around.

Located at Las Vegas Boulevard and St. Rose Parkway, several miles south of the Strip, the 11-story M Resort will have 390 rooms and suites; 90,000 sf of gaming space; 40,000 sf of meeting and conference facilities; a 20,000-sf spa; a 2.3-acre pool and events area; a wine cellar and tasting room; a top-floor lounge and nine restaurants. The structures, including a 2,000-slip parking garage, cover about 12 of 95 contiguous acres controlled by Marnell III.

The entire property is entitled for 6,000 hotel, condo and condo-hotel units and upwards of 1 million sf of retail. The retail, a big chunk of which would be built atop the parking structure, is much further along than any additional hotel or condominium units. A 14-screen, 63,000-sf upscale movie theater is slated open by the end of 2009 atop the parking garage, and Marnell III and Taubman have signed a letter of intent to jointly develop a 1.3 million-sf, department store-anchored high-end shopping mall that would open in late 2011 or early 2012.

In a conference call with analysts in August, Taubman CEO Robert Taubman spoke highly of the retail opportunity at M Resort but cautioned that the M Resort shopping mall is at this point only “a good story” and that the company needs to have a lot of good stories. “Unfortunately, we are not going to be able to build them all,” he says. “Some of them will fall by the wayside.”

To let potential customers know the project is nearing completion regardless of what happens with the Taubman plan, Marnell has contracted with the Lightship Group to bring a flying billboard to the Las Vegas sky beginning this month. The “electronic lightship” is essentially a blimp with a 2,100-sf lighted electronic screen that can broadcast a multitude of media from live television and streaming video, to web sites and static images.