Las Vegas Sands proposes $2.14B rescue plan

Nov 13, 2008 8:30 PM

Staff & Wire Reports |

Billionaire Sheldon Adelson has doubled down on his half-billion dollar bet this fall on Las Vegas Sands Corp. in a plan intended to keep the company from defaulting on its debt and falling into bankruptcy.

The plan for infusing $2.14 billion in new capital into the company dramatically reduces Adelson's controlling stake even as he agreed to invest another $525 million.

The casino giant with operations in Las Vegas and Macau will not seek shareholder approval for the emergency plan it announced Tuesday, even though it more than doubles the number of outstanding shares, massively diluting their value for current shareholders, claiming an exception in New York Stock Exchange rules.

The company warned that any delay caused by getting shareholder approval "would seriously jeopardize the ability to complete the offerings as well as the financial viability of the company."

The transactions are set to close Friday.

Trading in the Las Vegas-based company's stock on the New York Stock Exchange was halted briefly Tuesday. It closed down 33 percent, or $2.66, at $5.34, after trading resumed. The stock has traded between $4.32 and $122.96 during the past 52 weeks.

Analysts greeted the plan with caution.

"We view the capital raise as a mixed blessing," Morgan Stanley analyst Celeste Mellet Brown said in a research note. "While it appears the company has alleviated bankruptcy risk, it has done so at a heavily dilutive price."

"In this market, capital comes at a high price,'' noted Stifel Nicolaus analyst Steven Wieczynski, ``and Las Vegas Sands is certainly paying for it."

The company said it would raise $1 billion in capital by selling 181.8 million new shares at $5.50 apiece and another $519.6 million in the form of new preferred stock priced at $100 each.

Adelson, the 75-year-old founder and chief executive, will buy with his wife Miriam $525 million in preferred stock and must convert into common stock the $475 million in convertible notes they purchased a month ago.

Investors in the preferred shares, including the Adelsons, received with each one a five-year option to buy another 16.7 common shares at $6 -- which could raise another $1.04 billion.

Some 460.5 million new common shares will be released on top of the 355.7 million already in circulation so -- despite the new investment -- the Adelson family's stake in the company will fall to just over 51 percent, down from 69 percent earlier this year. Once the plan goes through and the capital is raised, their stake will be about $2.2 billion.

The company's current situation is a remarkable setback for Adelson, once considered the third richest man in America by Forbes magazine with an estimated worth of $28 billion as recently as September 2007, much of which was tied up in shares.

Since hitting $145.57 on Oct. 2, 2007, Las Vegas Sands shares have lost 96 percent of their value.

The action follows Sands' announcement last week that it is in danger of breaching lending conditions and defaulting on $5.2 billion in credit facilities secured by its Las Vegas operations.

Construction on casino projects in Macau, Singapore, Pennsylvania and Las Vegas put the company in a financing squeeze as falling revenue from gamblers made it difficult to meet its debt obligations.

It faced the choice of canceling or delaying some projects, raising equity, or reducing debt, and its capital program is an attempt to address all those problems.

Sands reported weaker-than-expected results Monday for the third quarter and said it suspended several projects, including its $600 million St. Regis condominium tower in Las Vegas and two sites on the Cotai Strip in Macau.

The Macau sites cost $1.16 billion so far and would cost another $430 million through June to suspend.

On Tuesday, Macau's leader, Chief Executive Edmund Ho, said the government of Chinese gambling enclave was aware of Las Vegas Sands' funding difficulties, but was not in a position to intervene.

"Because of its over-leveraged borrowing in the U.S. and around the world, it's normal and expected that it has to suspend some of its projects," he said.

"Until now, the Macau government has no concrete measures to help it solve its financing difficulties immediately," he said.

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