Las Vegas Sands: Is Goldman Sachs Working on Club Loan?

Reuters ran a story this morning with sources stating that Goldman Sachs (GS) is in talks to put together a syndicate loan for Las Vegas Sands subsidiary Venetian Macau Ltd., to the tune of about $1 billion. According to the story, the loan would be based on the lots 5 & 6 on the Cotai developments, which strike me as a bit strange. (For more on Cotai, peruse “LVS - Thoughts on 2009 Sustainability.“)

If LVS was able to get financing with those assets as collateral, there could be time constraints as to when construction would have to start back up. CEO Sheldon Adelson’s claims on the lands aren’t even that solid to begin with. I was expecting to see a $1b or so deal on Canal Shoppes retail properties, but it’s quite likely that commercial real estate is a complete logjam right now.

I still see a funding gap of between $500m and $1b, but I am still of the belief that Adelson & Co. can pass fourth quarter covenants, which should take some of pressure off to rush a deal. Based on the LVS’s existing term loan in the secondary market, financing costs are going to be 11% or higher. Ouch.

Stock Price Reflects?

Shares are down another 18% today, and now go for about 40% less than the secondary offering just one week ago. It’s hard to parse how much of that is market-driven, but this is quickly becoming a binary investment thesis - the current equity (now a scant $1.14 billion) makes it, or it doesn’t.

Casinos have often proven to be relative safe havens during recessions, but the global loss of wealth (either realized or on paper) this time around is truly unprecedented. I don’t know how Macau will hold up over the next few months. Critial mass of facilities is getting close to fruition, but this is the worst time in history to be “ramping up” offerings. Investments here continue to have high upside and 100% downside.

Disclosure: The author does not hold a position in LVS.

Comments

[Ryan Barnes:]

Hi Dan,

You should check out my prior postings re: LVS; I am in fact bullish on the company. I take it you're not much of a homework guy yourself...




On Nov 22 01:25 PM User 218405 wrote:

> The author doesn't hold a position in LVS, but to write about the
> company he should be try to do his homework as his comments shows
> a lack of knowledge about the company. Beleive me LVS is a steal
> at 3.23 a share.
>
> Dan Kowkabany

2008 Nov 22 05:48 PM

[millie:]

LAS VEGAS SANDS CASINOS IN LAS VEGAS, VENETIAN AND PALAZZO, WAS FULL TO CAPACITY , IT WAS BUZZING ALL OVER THE PLACE WITH GAMBLERS, DINING, ENTERTAINMENT, TOURNAMENTS. I AM PUZZLED HOW THE AUTHOR DOESN'T BELIEVE IN THE COMPANY WILL SURVIVE, EVEN IN THIS DOWNTOWN, PEOPLE SEEM TO STILL LIVING THEIR FUN LIFE. . HOPE THE AUTHOR DOES HIS HOMEWORK BY VISITING LAS VEGAS TO SEE THE CROWDS.
I DO OWN SHARES AT FOUR AND FIVE DOLLARS. I SAW THIS A BARGAIN.

2008 Nov 22 10:05 PM

[john redmond:]

LVS is a company I would like to own . I have no inside information but my gut feeling tells me this company will do well in the distant future . For now I will stand on the sidelines, keep my power dry, and watch how this all plays out.

2008 Nov 23 01:11 AM

[McInnis:]

I have been in the construction trades for the past 12 years. Not only do I live here in Las Vegas I also help build these mega resorts and own stock in LVS, MGM, BYD, and WYNN. So I know first hand whats happening before the general public reads about events days and even weeks later. What a wonderful way to undervalue your stocks by selling millions of shares @ $5.50 and buy them back for $2.00 less then what you just sold them for a few days earlier. Sheldon Adelson is not a stupid man, don't panic and jump ship, the shares will only increase in price after January.

The entire gaming industry has taken a short term hit..... not only LVS

2008 Nov 23 02:01 PM