Las Vegas Sands’ $2bn throw of dice

Struggling casino operator Las Vegas Sands avoided collapse this week after raising $2.14bn (£1.37bn) of new capital.

Las Vegas Sands, which owns the Venetian casino in Las Vegas, said in its third-quarter results on Monday that it would raise $1bn (£656m) by selling 181.8 million new shares at $5.50 each, and the rest from selling new preferred stock.

It will also temporarily suspend development of the Shangri-La, St Regis and Sheraton hotel casinos on Macau’s Cotai Strip and indefinitely suspend part of its St Regis residential scheme in Las Vegas, potentially saving $1.8bn (£1.15bn).

Bill Weidner, Las Vegas Sands’ president and chief operating officer, said it would look to ‘right-size’ its development pipeline, and that it would focus its development activities and available capital on completing the Marina Bay Sands in Singapore (pictured above) and the Sands Bethlehem in Pennsylvania.

The capital raising will also include around $525m (£341m) from the company’s chief executive, Sheldon Adelson.

Shares rose by 13.8% to $8 in New York on Monday. This followed a 30% fall last Thursday after a PricewaterhouseCoopers auditor’s report to the US Securities and Exchange Commission warned that Las Vegas Sands could breach debt covenants and would require additional funding for development.

These are troubled times for the quoted gaming sector. Shares in rival casino operators MGM Mirage and Wynn Resorts have fallen from year highs of $92 and $138, respectively, although both rose on Tuesday by 2.7% to $12.6 and 1.7% to $46.

Las Vegas Sands hopes to make inroads into its gross debt of $9.1bn (£5.84bn).

The company’s decision to continue to invest in Singapore while halting operations in Macau will be a blow to ‘Asia’s Las Vegas’. The $4.2bn (£2.7bn) Marina Bay scheme will have 2,500 hotel rooms and 2m sq ft of convention and retail space. It is due to open by December 2009.

Speymill Group chief investment officer Floris van Dijkum said:

‘China will not want to lose to Singapore. This decision puts Singapore on the map but Sands already has more in Macau than it is planning in Singapore.’

Speymill’s AIM-listed Speymill Macau Property Company has invested $340m (£218m) in the ex-Portuguese colony since 2006. Van Dijkum said that although casinos are suffering, economic reforms announced on Tuesday by Macau’s outgoing chief executive, Edmund Ho, will help its property market.

Ho said first-time buyers of homes worth less than HK$3m (£248,000) would pay no stamp duty and qualify for a 4% mortgage subsidy.

Tom Ashworth, director of Sniper Capital, manager of the AIM-listed Macau Properties Opportunity Fund, which plans to develop around 300 homes in Macau, said: ‘Obviously, Las Vegas Sands’ decision will slow down foreign population influxes, but [Edmund Ho’s announcement] will enable the local population to grow.’