Moody's Investors Service on Tuesday confirmed the ratings of Las Vegas Sands Corp. (LVS) and assigned the casino operator a negative outlook.
Moody's confirmed Las Vegas Sands "B3" junk corporate family rating, probability of default rating, and long-term debt rating. The agency also raised the company's speculative grade liquidity rating to "SGL-2" from "SGL-3."
The ratings confirmations and upgrade followed "several positive events that have occurred since July 31," which have improved the company's liquidity, debt position and ability to stay in compliance with its debt covenants, wrote Moody's analyst Keith Foley. The most recent was a $2.5 billion initial public offering by Sands China Ltd., a formed indirect subsidiary. The stock debuted in Hong Kong on Monday.
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Other events include converting $600 million of exchangeable bonds into equity, the repayment of $500 million in debt for its Macau subsidiary and amendments to the credit facility for its unit in the Chinese gambling enclave.
The confirmation and upgrade also takes into account an improved outlook for the company's Macau subsidiary.
"In Macau, more friendly gaming policies from the local government, limited supply of new gaming tables in the near term, and expectation of no further stringent enforcement by the Chinese government over tourist visitations to the enclave support stable growth for the sector's revenues," Foley wrote.
But the company still faces "significant credit challenges." These include Moody's expectation of further deterioration in the Las Vegas Strip gaming market, a slower than expected ramp-up of the company's property in Bethlehem, Pa., and further debt-financed expansion in Macau.
The negative rating outlook reflects the development and ramp-up risk related to LVSC's Singapore $5.5 billion casino project. The project is scheduled to open in the first quarter of 2010, Foley wrote, "and is expected to be a key catalyst with respect to debt reduction over the next two years." A delayed opening or slower than expected ramp-up there could hurt the company's ability to reduce debt and maintain its current ratings.
The action concludes a review for possible downgrade that began on July 31.
Las Vegas Sands shares closed Tuesday at $16.12, up 80 cents or 5.2 percent.