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Las Vegas Sands facing bankruptcy risk

Nov 6, 2008 9:53 PM

Staff & Wire Reports |

According to the AP, Las Vegas Sands (LVS) has said it is in jeopardy of missing certain financial covenant requirements and needs to raise more capital.

Shares of billionaire Sheldon Adelson's casino company plunged $4.70, or 40.3 percent, in midday trading but began to inch upwards as the day progressed. It closed at $7.85 a share, down 32.68 percent for the day.

In a filing with the Securities and Exchange Commission, Las Vegas Sands said it expects to miss certain borrower obligations for the fourth quarter, which ends on Dec. 31. It could potentially continue afterward. If that happens, lenders would be able to demand their money sooner.

The defaults would "raise substantial doubt about the company's ability to continue as a going concern," the filing stated. A going-concern qualification refers to a company's ability to continue to operate indefinitely.

Las Vegas Sands was in a similar position in the third quarter, but Adelson and his wife, Miriam Adelson, loaned the company $475 million through a 6.5 percent convertible note due in 2013.

Late last month, the operator of the Venetian and Palazzo resorts in Las Vegas and the Sands Macao and the Venetian Macao in China said Adelson and his family also planned to take part in a capital raising program with an unnamed investment banking company.

In an October interview with The Associated Press, Adelson said that Las Vegas Sands was looking to raise $2 billion in debt financing from Asian banks to finish work on some Macau expansion projects. The casino mogul controls nearly 70 percent of Las Vegas Sands personally and through family trusts.

Las Vegas Sands filed a shelf registration with the SEC which gives it the option to raise capital through debt, stock or other financial vehicles.

The casino industry has been hard hit as customers continue to spend less as recession fears grow. Boyd Gaming Corp. recently postponed work on its $4.8 billion Echelon resort in Las Vegas. The Las Vegas-based company also suspended its annual dividend.

MGM MIRAGE's default rating was downgraded by Fitch Ratings in October partly due to its 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.

Meanwhile Ameristar Casinos Inc. disclosed in an October SEC filing 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.

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