Venetian hit by bad luck, must rely on Adelson

Thursday, April 5, 2001 | 11:37 a.m.

The parent company of the Las Vegas Strip's Venetian megaresort is warning it will likely need to rely on credit from owner Sheldon Adelson to keep from falling out of compliance with its credit agreements.

In its annual report, Las Vegas Sands Inc. said it will be "challenged to meet certain covenant tests in the first quarter of 2001 due to an extremely low win percentage" in recent quarters. Those credit agreements require the Venetian to maintain minimum levels of cash flow over the trailing four quarters. Cash flow is a crucial measure in determining whether a gaming property will be able to meet its debt payments.

A Venetian executive said last month he expected the resort to post cash flow of $39 million to $42 million for the quarter ending March 31, down 24 percent to 29 percent from the year-ago period. Executive Vice President Bradley Stone blamed this on poor table game hold, which he said reduced cash flow by $13 million to $15 million for the quarter.

Cash flow was also reduced by poor table hold in the quarter ending Dec. 31, though not as badly. Despite poor hold, Las Vegas Sands posted cash flow of $49 million for the December quarter, up 35 percent. The company noted its new strategy of focusing on high-end table game customers, started early last year, makes the resort more susceptible to swings in cash flow.

Though the below-normal cash flow would cause a breach of certain covenants, the Venetian is saying that isn't going to happen. That's because Adelson, Las Vegas Sands' sole shareholder, plans to issue a letter of credit for an amount that would make up the shortfall in cash flow. The letter would be cancelled once the Venetian's cash flow returned to normal levels.

The company said it anticipates that its hold percentage will return to normal over time.

Separately, Las Vegas Sands paid Chairman Sheldon Adelson $1.5 million in salary last year, the company said.

Adelson drew no salary from Las Vegas Sands, parent company of the Venetian, in 1999. Other Las Vegas Sands executives also drew sizable raises and bonuses in 2000, a year that saw the Venetian post its first net profit as revenues and cash flow soared.

William Weidner, president and chief operating officer, was paid $951,000 in salary and a $300,000 bonus, a 57 increase in pay over 1999.