1,000-room addition back on track at Venetian

David Strow

Monday, May 6, 2002 | 11:01 a.m.

The Venetian is apparently moving forward again with a $200 million expansion plan, as part of a $1.33 billion refinancing of its debt.

The north Las Vegas Strip property, owned by Sheldon Adelson's Las Vegas Sands Inc., suspended its plans to build a 1,000-room hotel tower last September. The cause was a drastic deceleration in the Las Vegas tourism industry.

But The Venetian's business, like that of its competitors, has bounced back in 2002. And, as a result, Las Vegas Sands today said proceeds from a new bond offering would be used "to finance the construction and development of the Phase 1A addition."

The Venetian did not specify when it would move forward on the project, and company officials could not be reached for comment. However, one analyst viewed it as a signal that construction would proceed as soon as the financing deal closes. Las Vegas Sands said it expects the financing to close by June 30.

"When you look at their rates and occupancy from January through April, they have been extremely strong," said Andrew Zarnett, gaming analyst with Deutsche Banc Alex. Brown. "There is excess demand for rooms that exist today. The solution is to fix that problem and complete that expansion."

The expansion will be just one part of a massive refinancing of The Venetian's debt load. Las Vegas Sands plans to sell $850 million in new mortgage notes, and also plans to open a $450 million senior secured credit facility. Proceeds from these offerings will be used to buy back the Venetian's old bonds and to pay off other credit lines.

If successful, the refinancing could result in huge savings for Las Vegas Sands. Currently, it has $425 million in mortgage bonds that pay 12.25 percent interest, and $97.5 million in subordinated bonds that pay 14.25 percent interest.

The Venetian's new rates would depend entirely on what rating the offering is assigned by credit rating agencies; currently, Standard & Poor's has a single-B corporate credit rating on Las Vegas Sands, a mid-level "junk" rating. It is possible Las Vegas Sands could get new interest rates between 10 percent and 10.5 percent, a Wall Street source said this morning. The interest rate could conceivably go below 10 percent with the right rating, the source said.

The Venetian is offering a 6 percent premium to buy back the mortgage bonds, and a 7 percent premium on the subordinated debt; the buyback offer ends June 3.

"It's one of the best markets for raising money for gaming, coupled with a dramatic improvement in the fundamentals of that company over the last two years," Zarnett said. "The last time they raised money, they were just an idea. Now they're a company that's reality."