Sunday, November 09, 2008

Translated from HK MingPao-US Les Vegas Sands in Financial Trouble

US Les Vegas Sands in Financial Trouble, Macao may be dragged
Debt at HK$70.2 Billion Development projects may be delayed.
7 Nov 2008

(Ming Pao) American listed Las Vegas Sands, the largest gaming and entertainment conglomerate in the world, has gotten into a financial crisis. According to a document submitted to US regulatory institution, its auditor has claimed that the company might have breached revenue-debt ratio limit set by the contracts' with its debtors. If the company is unable to get fresh capitals, it may trigger a chain of breaches on its debt obligations which may result in its debtors recalling back its loans. This raises substantial doubt about the company's ability to continue as a going concern. Sands has declared that it may have to put a few of its big development projects on hold, including those in Macao, for the time being. Sands stock price has dropped 22% to US$9.15 yesterday night. It has experienced a drop of 94% from its peak for the past one year.

Sands Macao business as usual

Sands Macao spokesman has made a statement late last night, indicating that it has not received any information of its parent company's financial woes and Sands Macao would continue business as usual. Macao Labor Union chief Mr. He Xin Guo has also indicated that they have not received any news about Sands' financial woes. However, there are already some rumors on Sands' financial woes in Macao's internet discussion forum but they did not provide any concrete evidence.

According to the document submitted by Sands to US regulatory body, by the end of 2007, Sands has accumulated up to US$9billion (about HK$70.2 billion). Some of Sands' debtors has set a limit on its revenue-debt ratio as a condition for their loans but its auditor has pointed out that Sands may not fulfill that requirement by the end of the fourth quarter of this year. This would result in Sands breaching the contracts and these debtors would have their legal rights in demanding early repayment of their loans. On the other hand, Sands may be forced to stop its development projects and this raises substantial doubts about the company's ability to continue as a going concern.

Looking into new capital injection

Sands has stated that it is working closely with its financial advisors to look into new capital injection plan. The company has also indicated that in the event that it fails to get new capital injection, it will seek to amend the loan contracts and appeal to its debtors to be temporarily exempted from that clause in the contracts.

Sands is the most aggressive gaming company in the world with numerous BIG developments of gaming projects in United States, Macao and Singapore. According to Bloomberg's estimates, the total investment in these developing projects amount to a total of HK$132.6 billions. According to sources, there is still a shortfall of HK$39billions in Macao's development. However, under the present circumstances of global liquidity crunch caused by the financial tsunami, Sands will definitely have difficulties in getting huge amount of loans from the banks. On the other hand, due to the tightening of travel permits for mainlanders to visit Macao's casinos by the central government, business in Macao's casinos has already been greatly affected.

Due to the difficulty in raising new capital, the biggest shareholder billionaire Sheldon Adelson has come up with HK$3.7 billions of new injection of capital into Sands last month. Other than this, there were reports of talks between Sands and Citigroup in seeking for HK$40.82 billion of fresh syndicate loans to finance loans repayment and the development of Macao's Sul Bright Way project. Moody's has downgraded Sands' long term loan by 3 grades while Standards and Poor has downgraded Sands by 1 grade to B+.

Earlier on, Sands has announced the sales of some of its properties, including part of Macao's Four Seasons Hotel ownership in a bid to solve its financial woes.

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