Las Vegas Sands (NYSE: LVS ) has moved a step closer to raising funds for its Macau operations, gaining clearance from lenders to support a limited initial public offering of shares in its Macau properties.
The announcement Thursday of an amended agreement with lenders enables Las Vegas Sands to remain neck-and-neck with archrival Wynn Resorts (Nasdaq: WYNN ) over which one can be the first to raise the most money to alleviate debt burdens caused by their expansion in China.
Last month, Wynn applied to the Hong Kong Stock Exchange for a "possible listing" on the exchange, adding that no decision had been made on the timing or terms -- or if Wynn would ultimately pursue the listing.
More Macau debt relief
Both trail another Macau competitor, Hong Kong-based Melco Crown Entertainment (Nasdaq: MPEL ) , in the race for extra cash. Also on Thursday, Melco Crown priced a secondary offering in the U.S., which will provide at least $190 million. The proceeds will be used to speed up payment of debt related to its City of Dreams casino/hotel complex that opened June 1.
Las Vegas Sands plans to raise more than that amount. The company improved its chances when lenders agreed to amend a $3.3 billion credit facility.
The agreement enables Las Vegas Sands to sell a minority interest in its Macau operations. Sheldon Adelson, the chairman and CEO who has been dropping hints and offering comments for a while, said Thursday that the agreement gives his company "financial flexibility."
Analysts predict the IPO would be filed with the Hong Kong Stock Exchange. Adelson would only say that the deal with lenders "allows us to pursue a potential listing of a minority interest in our Macau operations on an Asian stock exchange."
The fine print
The agreement with lenders says that the sale of any equity stake in Las Vegas Sands' Macau properties must guarantee that $500 million be used to prepay loans outlined in the credit facility. The company can also issue up to $1.5 billion in new debt subject to certain restrictions.
Clearly, friendly lenders are better than unfriendly ones. However, equity investors should have learned by now that Las Vegas Sands needs more than debt-related headlines to produce sustained confidence in the stock.
The stock climbed 12.2% Thursday on double the average daily volume, but was losing part of those gains on Friday.
Yes, the stock is back from the abyss of a 52-week low that was $1.38. But it's still way below the 52-week high of $59.17. That figure is less than half of what Las Vegas Sands was trading at in the fall of 2007.
To quote a character from the TV show Hill Street Blues: "Let's be careful out there."
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