Adelson called masterful at using others’ money

Tuesday, Aug. 20, 2002 | 11:16 a.m.

Sheldon Adelson is cleverly avoiding risk while creating great upside potential for himself with his casino resort development in the Chinese city of Macau, Forbes Magazine reports in its Sept. 2 edition.

Adelson is the entrepreneur who created the giant Comdex computer convention and then sold it. He now controls the Venetian megaresort on the Las Vegas Strip and the massive, adjacent Sands Expo Center.

"Sheldon Adelson has grandiose plans in Macau. Other people are putting up the capital," Forbes reported. "... Adelson didn't get onto The Forbes 400 by exposing his own fortune to needless risk. He is a master of the fine art of using other people's money."

"We're looking to change the face of Macau," Adelson says in the Forbes story. "This will be the crowning achievement of my business career. It's the most challenging adventure I've ever taken in my life and has the potential to be bigger than everything I've ever done. I wouldn't even want to sell it for $500 million. It's going to be worth many billions."

Forbes explained that to build the Venetian, Adelson issued $515 million in junk bonds and put in another $95 million in cash. But while the Sands Expo Convention Center is part of the complex, it wasn't pledged as collateral; it was pledged against the $75 million that Adelson borrowed for his cash equity portion. "So if the deal went bust, bondholders would have waited behind the banks to take their share of what was left of the collateral," Forbes said.

"In Macau, Adelson seems to have next to no risk, yet has cleverly positioned himself to enjoy the upside if the project succeeds. The deal with the Macau government obligates Adelson's group to spend $1.1 billion within 10 years," Forbes said. "But although Adelson's May refinancing of $850 million in notes includes an allowance of up to $40 million for Macau, he also quietly revealed in an earlier 10K filing that his Las Vegas Sands Inc., which is privately held but issues public bonds, isn't 'obligated to pay' anything on the project. His only commitment is an option for a 30 percent stake. The privilege of gambling real money on Macau is apparently reserved for Adelson's less visible partners, who consist of prominent local families."