Adelson to partake in capital program

Associated Press

Friday, Oct. 24, 2008 | 11:17 a.m.

Las Vegas Sands Corp. said Friday that Chairman and Chief Executive Sheldon Adelson and his family plan to take part in a capital raising program with an unnamed investment banking company.

The casino operator said more details about the program will be disclosed "in the very near future."

The casino industry has been pressured as consumers continue to tighten spending due to the ongoing housing slowdown, diminishing credit, rising food costs and recession fears.

Las Vegas Sands Corp. shares fell $1.24, or 15.1 percent, to $6.97 in midday trading. The stock hit a new low for a second straight day, reaching $5.80 earlier in the session. A year ago the shares traded as high as $148.76.

Steven Wieczynski of Stifel Nicolaus & Co. said in a client note that the company's faltering financial position has been the biggest overhang on the stock. He believes investors are selling shares because the current credit crisis has raised fears that "Las Vegas Sands is in jeopardy of running out of cash and going bankrupt."

A representative for Las Vegas Sands could not be immediately reached for comment.

Thomas Weisel Partners' Jake Fuller was a bit more optimistic, saying the company's announcement -- while short on details -- may be viewed as a very modest positive.

"While there is a very real balance sheet risk here, we argue that Las Vegas Sands will be able to dodge a crunch with an infusion from Mr. Adelson, a covenant amendment, securing of project financing or delay of Cotai projects," he wrote.

Fuller reiterated an "Overweight" rating and $25 price target.

On Wednesday Adelson said in an interview with The Associated Press that the company is looking to raise $2 billion in debt financing from Asian banks to finish work on some Macau expansion projects. The casino mogul, who controls nearly 70 percent of Las Vegas Sands personally and through family trusts, said that foreign banks are in better shape to participate in such transactions than their U.S. counterparts right now.

Earlier this month Adelson and his wife, Miriam Adelson, loaned Las Vegas Sands $475 million through a 6.5 percent convertible note due in 2013. The investment helped the operator of the Venetian and Palazzo resorts in Las Vegas and the Sands Macao and the Venetian Macao in China meet its liquidity requirements and avoid triggering a loan covenant.

Many casino companies have started to feel repercussions from the credit crisis. Boyd Gaming Corp. recently postponed work on its $4.8 billion Echelon resort in Las Vegas. The Las Vegas-based company, whose ratings were lowered by Moody's last week, also suspended its annual cash common dividend.

And on Wednesday MGM Mirage's default rating was downgraded by Fitch Ratings partly due to the company's difficulty paying for the $9.2 billion CityCenter complex in Las Vegas. The company has reached a deal with lenders to change the terms of $7 billion in debt.

On Thursday Ameristar Casinos Inc. disclosed in a filing with the Securities and Exchange Commission that it had arranged an interest rate swap with U.S. Bank National Association in order to change the annual interest rate on a credit agreement from floating to fixed. The casino operator said the transaction would lower the risk associated with the rate for $600 million of senior secured revolving debt remaining under the credit facility.