When I read about a possible IPO of Las Vegas Sands' (NYSE: LVS) Macau operation, I couldn't help but think of The Producers, the 1968 Mel Brooks film and, later, a Broadway musical.
In the Mel Brooks incarnation, a theater producer named Max Bialystock tries to make money by creating a flop. Las Vegas Sands chairman and CEO Sheldon Adelson is trying to avoid a balance-sheet flop by raising funds and/or selling assets. Bialystock sold more than 100% of the shares in his theater production, which he expected to fail. Adelson isn't selling that much; he wants his production to succeed.
However, Adelson's efforts, while not as frantic, have a sense of urgency not only to reduce existing debt but also to build a cushion for expensive expansion plans in Southeast Asia.
His company stopped construction on another Macau project in November, but it hopes to resume later this year. Despite a worldwide recession and some setbacks in Macau, Adelson also is forging ahead with the next piece of his grand plan -- opening the Marina Bay Sands casino/hotel complex in Singapore in several phases starting in early 2010.
Dealing with debt
If Adelson chooses an IPO on the Hong Kong Stock Exchange for his Macau properties, it will be the latest move to cope with significant debt, which has included issuance of more stock and warrants in the U.S. in November.
Adelson and Las Vegas Sands executives have been talking for some time about Macau-related money-raising ventures. Yesterday, he told The Wall Street Journal that a Macau IPO on the Hong Kong Stock Exchange or sale of Macau assets could produce $3.5 billion. Also on Wednesday, Adelson and company President Michael Leven told Bloomberg they were exploring several avenues, including a Macau IPO, to raise $3 billion to $4 billion.
Las Vegas Sands isn't the only U.S. casino giant with Macau properties attracting attention. Last month, The Financial Times said the Malaysian conglomerate Genting invested $200 million in MGM Mirage (NYSE: MGM), buying some debt and 3.2% of shares. The move invited speculation that Genting coveted part or all of MGM Mirage's share of a casino/hotel property in Macau, which is part of a joint venture with a Hong Kong company. Meanwhile, Wynn Resorts (Nasdaq: WYNN) is playing a pat hand with its Macau investment.
The curtain rises on the next move
All of the speculation comes at a time when the Chinese gambling capital's market is soft. Returns for June were disappointing, affecting not only U.S. companies, but also China-based Melco Crown Entertainment (Nasdaq: MPEL).
Given this climate, Las Vegas Sands' investors must hope that Adelson's financial maneuvers are as successful as Mel Brooks' presentation. Otherwise, Adelson will discover that shareholders and bondholders can be as opinionated as opening-night theater crowds.
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