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Las Vegas Sands shelves projects
Company seeks $2 billion to stay afloat
Monday, Nov. 10, 2008 | 5:05 p.m.
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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.
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Gee, L.V.Sands gambled and lost. When you're in the business to fleece people vulnerable to this vice and finally get fleeced yourself, we can only smile. Hopefully gaming will rebound in Nevada and the Legislature will find it's way to double the gaming tax.
Hey Jim, maybe the legislature can institute an income tax like most other states so all people will play a part in supporting the state, instead of just the gaming industry...
"...fleece people vulnerable to this vice and finally get fleeced yourself, we can only smile."
Sheldon's dream and L.V.Sands has been bitten by the same bug as everyone else. Except you apparently.
Do you live in Vegas? It amazes me that anyone who lives here could say something so ridiculous. If not for people like Sheldon Adleson, this city would be nothing. Nobody would come here to do a damn thing. They would drive right through because there would be no here here.
Hey John, Newsflash! Sheldon is in it for Sheldon. If you think he's in it to make L.V. prosper, you're a naive fool.
Thanks for the business education Jim. I'm a naive fool of a business owner who knows no other business owners who are doing it for any reason other than to make a profit for themselves.
Let me be clear, I did not come to Las Vegas for the scenery. How anyone here could "smile" over a huge player in our key industry suffering is beyond me.
Why is it that people whom look upon the gaming industry with such disdain ("Gee, L.V.Sands gambled and lost. When you're in the business to fleece people vulnerable to this vice and finally get fleeced yourself, we can only smile.") actually live in Nevada? I can only hope that NoNev stands for Northern Nevada. Las Vegas grew and prospered as a City because of the gaming industry, and those with the vision and the finances to build the Mega-resorts that in themselves are a draw to our city. I have yet to see a Casino strongarm an individual to gamble all their money away, or as you put it, NoNev, "fleece people". Were it not for the gaming industry and the revenue it generates for our state, Nevada would merely be a chapter in the History books. Whether or not the Sands Corp (Sheldon Adelson) turns a profit or not dictates how many jobs are created, or eliminated within one of our cities larger employers, so who is being the naive fool? Just like those individuals who do not like the sound of jets flying, should not buy a house near Nellis AFB and then complain, people who are anti-gaming should not live in a gambling revenue dependant state.
Very well said Rick.
It reminds me of Ralph Nader's visit to Vegas, when he espoused the elimination of institutionalized gambling. Since then I have espoused the elimination of Ralph Nader.
Sheldon Adelson -- who has seen the value of his stake in Las Vegas Sands Corp. shrink by roughly $30 billion in the past year -- has agreed to a financing deal that further dilutes his holdings at a time when he faces an internal challenge to his authority.
On Tuesday, the company released the details of a planned $2.1 billion stock offering that would reduce the chairman's stake in Sands to 51.3% from 68.9%. Mr. Adelson will spend $525 million of his own money as part of the stock-purchase plan -- a safety net to help guard his majority ...