Analyst: Las Vegas Sands should start Macau IPO

Casino operator Las Vegas Sands Corp. should proceed with a Macau initial public offering to help meet its liquidity needs, a UBS analyst said Thursday.

Robin Farley said in a client note that Las Vegas Sands is highly likely to trip up the maximum leverage covenant on its senior secured credit agreement at the end of September, so the Macau IPO could be quite helpful.

The Sheldon Adelson-led company, which runs the Sands Macao and Venetian Macau, had a debt load of $10.41 billion at the first quarter's end. The Sands, like many in the sector, has struggled as gamblers have pulled back on their spending and decided to frequent local casinos more regularly during the recession.

The company's stock surged last month amid initial reports of the potential Macau IPO. The company declined to comment on the report at the time.

Farley estimates the company will have to raise $2 billion to $2.5 billion from a possible Macau IPO to cover a number of obligations, including repaying part of its Macau debt, helping to pay for part of its Marina Bay Sands project in Singapore and providing additional funds for its new Sands Bethlehem casino resort in Pennsylvania.

To meet all of its needs, Las Vegas Sands may have to sell about 25 percent of its Macau operations, Farley explained.

Some analysts previously speculated that the casino operator might try to sell some assets, such as units at its Four Seasons hotel in Macau and Asian retail malls. The company indicated in May that such an action was possible, saying it was continuing to explore the sale of its noncore assets. Las Vegas Sands also previously announced that it was in talks with some parties interested in taking minority stakes in its Macau developments.

Farley maintained a "Neutral" rating and $12 price target.

Shares of Las Vegas Sands added 23 cents to $7.97 in morning trading.