Las Vegas Sands Said to Plan Hong Kong IPO Filing

21.07.2009, Las Vegas Sands Corp., controlled by billionaire Sheldon Adelson, plans to apply in Hong Kong early next month for an initial public offering of shares in its Macau casinos, said a person with knowledge of the matter.

July 20 (Bloomberg) Bloomberg

The Las Vegas-based casino operator also seeks amendments to its bank borrowings in Macau, including covenant relief and permission to sell as much as $1.5 billion in new debt, said the person, declining to be identified as the plans aren’t public.

Stock rallies this year have revived interest in share sales after IPO fund raisings in Hong Kong had the slowest first half since 2003, according to Bloomberg data. President Michael Leven said July 8 the company could raise at least $2 billion selling a minority stake in its Macau business in Hong Kong.

A share sale “would be an advantage for anyone who does it first,” said Gabriel Chan, an analyst at Credit Suisse Group in Hong Kong. “A lot of the companies in Macau are interested in raising funds.”

Las Vegas Sands is seeking funds to restart work on its $12 billion, 20,000-room hotel and casino complex on Macau’s Cotai Strip. Construction stopped last year as credit markets froze, revenue growth slowed and the risk of loan defaults swelled.

Hong Kong’s Hang Seng Index climbed 36 percent this year, more than double the advance of the MSCI Asia Pacific Index. As many as 100 companies may be reviving IPO plans in the city after the equities rout delayed sales scheduled in 2008, Jonathan Penkin, Goldman Sachs Group Inc.’s Hong Kong-based head of equity capital markets in Asia outside Japan, said July 2.

‘Too Much Debt’

“Las Vegas Sands has done a very good job in Macau with their existing two properties and has generated very good cash flow,” Billy Ng, an analyst at JPMorgan Chase & Co., said today in a telephone interview. “But they raised too much debt and still have to work on their incomplete construction.”

Las Vegas Sands rose 79 cents, or 9.2 percent, to $9.38 at 9:44 a.m. in New York Stock Exchange composite trading. The shares had climbed 45 percent this year before today.

Macau casino operators listed in Hong Kong gained today. Galaxy Entertainment Group Ltd. jumped 14 percent to HK$2.25, Melco International Development Ltd. gained 6 percent to HK$4.27 and SJM Holdings Ltd. rose 2.3 percent to HK$3.17. The benchmark Hang Seng Index advanced 3.7 percent.

Adelson’s Options

“The company is having discussions with its lenders regarding possible transactions in Macau,” Sands’ spokesman Ron Reese said July 17. Las Vegas Sands gets 71 percent of sales from Macau, the only place in China where casinos are legal.

The company was pursuing “public or private” options to boost liquidity and finish stalled projects, Adelson, chairman and chief executive of the casino company, said May 12. The IPO is part of plans to raise as much as $4 billion, he added June 8.

Las Vegas Sands may also buy back part of some U.S. term loans as it overhauls its finances, the person said.

Las Vegas Sands said March 24 it hired Goldman Sachs to negotiate credit amendments that might include buying back as much as $800 million of bank loans via modified Dutch auctions.

Still, the company hasn’t bought back any debt under the arrangement, according to Reese, the spokesman. Las Vegas Sands had almost $3.41 billion in Macau-related long- term debt as of March 31, regulatory filings show.

Revenue from Sands’ casino operations in Las Vegas made up 41 percent of total sales, while in Macau the figure is 85 percent, according to the company’s first-quarter earnings statement. The company makes more than twice as much revenue in Macau as in Las Vegas.

Potential Investors

Adelson said in March he was in talks with four groups of potential investors in Las Vegas Sands’ about operating Macau properties. About 19 parties indicated interest in two shopping malls the company is selling in Macau, he said.

Since halting the Macau project in November, Las Vegas Sands has raised capital and cut working hours and jobs to trim more than $470 million in costs. It plans to cut 3,000 to 4,000 jobs in Macau by September, Leven said May 12. The casino operator aims to resume construction on the Cotai project this year, Leven has said.

Macau casino revenue fell 2.3 percent to 25.4 billion patacas ($3.18 billion) in the three months ended June from the first quarter, according to statistics from the Macau Gaming Inspection and Co-ordination Bureau Web site. Compared with a year earlier, casino revenue was 12 percent lower.

Visitor arrivals in May dropped 20.4 percent from a year earlier, according to the Macau Statistics and Census Service. Visitor arrivals for the year to date fell 10.6 percent from a year ago, the figures showed.

China’s Economy

“We should be able to see positive growth again starting September because China’s economy is on the right track and the impact of the flu is temporary and a one-off,” Ng at JPMorgan Chase said.

In China, 48 British school pupils and teachers have been quarantined in a Beijing hotel after being screened for swine flu, according to the Foreign Office in London.

China became the first major economy to rebound from the global recession as its gross domestic product grew 7.9 percent in the second quarter. The 6.1 percent gain in the first quarter was China’s slowest growth in almost a decade.

To contact the reporter on this story: Beth Jinks in New York at bjinks1@bloomberg.net

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