Las Vegas Sands shelves projects

By Liz Benston

Monday, Nov. 10, 2008 | 5:05 p.m.

As expected, Las Vegas Sands has joined the list of casino companies that are delaying resort projects and cutting costs in response to the downturn.

During a conference call today to discuss third quarter earnings, executives said the company would indefinitely delay construction of its St. Regis-branded condo tower underway on the Strip and temporarily suspend under-construction hotels on the Cotai Strip in Macau, China, including a Shangri-La/Traders and Sheraton towers and three casinos.

The under-construction Sands casino resort in Bethlehem, Pa., will continue though with fewer amenities. A casino and parking garage will open in the second quarter of 2009.

Executives said the company expects to raise $2.14 billion in financing to keep the company afloat over the next 18 or so months, which are expected to be difficult. Details about what form the financing would take will be forthcoming, executives said. They expect the market to recover by 2012.

Last week, the company said it was in danger of defaulting on agreements with lenders that the company maintain a minimum of earnings relative to debts. Such defaults enable lenders to demand repayment.

Declining earnings amid the downturn has made it difficult for some gaming companies to meet such requirements, which are typical of bank loans, forcing some companies to take more drastic measures to reduce debt.

In the third quarter, the company began a cost-cutting plan that's expected to save about $100 million by the second quarter of 2009. Workforce reductions are part of the plan.

Las Vegas Sands narrowed its net loss in the third quarter, reporting a loss of $32.2 million versus $48.5 million in the same quarter of last year.

Third quarter earnings before certain expenses rose 48 percent and net revenue rose 67 percent as performance improved in both Las Vegas and Macau.

Earnings rose 22 percent across the company's Venetian and Palazzo casinos on the Strip, primarily because of ramped-up business at the Palazzo, which opened in January. Casino revenue rose 36 percent and hotel revenue increased 57 percent. These figures exclude rent expense.

The Venetian's occupancy fell 7.6 percentage points to 92 percent in the third quarter and average room rates fell $27 to $207. The Palazzo's occupancy was 94.5 percent and average rates were $231.

The earnings report also showed how the company is funneling its high-roller business to the Palazzo, where each table game generated revenue of $4,053 per day versus $1,501 at the Venetian next door, which is down from $4,362 a year ago.

Earnings rose 74 percent at the company's Macau properties, including the Sands and Venetian casinos. The 2008 quarter also included $3 million in earnings from the company's Four Seasons resort on the Cotai Strip.

The company talked up prospects for its Marina Bay Sands resort in Singapore, which has a lower tax rate than Macau - which is a lucrative growth engine for the company that has surpassed the Strip in profit. With prospects for up to 1,000 table games and a large local population, the megaresort is expected to generate earnings of $1.25 billion in 2012, outdistancing most major resorts. That property opens in late 2009.