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\tBy HOWARD STUTZ
\n\tLAS VEGAS REVIEW-JOURNAL
\n\tCompared with the competition, Las Vegas Sands Corp.\u2019s outstanding long-term debt of just less than $10 billion seems manageable, which led Wall Street to praise the company\u2019s plans to restructure a portion of the obligations.
\n\tCaesars Entertainment Corp. $23.5 billion<\/p>\n
\tMGM Resorts International $13.03 billion<\/p>\n
\tLas Vegas Sands Corp. $9.76 billion<\/p>\n
\tWynn Resorts Ltd. $6.2 billion<\/p>\n
\tSource: Company SEC filings<\/p>\n
\tThe difference between Las Vegas Sands\u2019 debt of $9.76 billion and the industry-high $23.7 billion owed by Caesars Entertainment Corp. is more than just $14 billion.<\/p>\n
\tWells Fargo Securities gaming analyst Dennis Farrell Jr., who specializes in high-yield bonds, said Las Vegas Sands and Wynn Resorts Ltd. have the best credit profiles of any of the major casino operators, primarily because of their wholly owned Macau operations.<\/p>\n
\tBoth companies have multiple resorts in the market that has already produced $40.9 billion in gaming revenues this year.<\/p>\n
\t\u201cTheir success in Asia has allowed the companies to return cash to shareholders in the form of dividends and stock repurchases,\u201d Farrell said.<\/p>\n
\tLas Vegas Sands\u2019 planned moves to improve its debt profile provide additional financial flexibility to participate in gaming expansion opportunities.<\/p>\n
\t\u201cA business can lever an entity at a lower cost for capital,\u201d Farrell said. \u201cIt magnifies the return. That\u2019s why we see companies use leverage. Sands and Wynn are both in a very good financial position.\u201d<\/p>\n
\tThis past summer, Las Vegas Sands Chairman Sheldon Adelson criticized his competition on the Strip, telling investors that properties operated by Caesars and MGM Resorts International were driving hotel room rates lower because of their high debt loads.<\/p>\n
\t\u201cI don\u2019t necessarily blame them,\u201d Adelson said during the company\u2019s second-quarter earnings call in August. \u201cI suppose if I were in that position, I might do the same thing.\u201d<\/p>\n
\tCaesars doesn\u2019t own a casino in Macau. MGM Resorts, which has $13.03 billion in long-term debt, is the majority owner of just one Macau resort. Wynn Resorts\u2019 total debt is $6.2 billion.<\/p>\n
\tLas Vegas Sands, Wynn Resorts and MGM Resorts are all building new hotel-casino complexes on Macau\u2019s Cotai Strip.<\/p>\n
\tFarrell said casino companies have continued to work to improve their debt profiles.<\/p>\n
\tCaesars has restructured portions of its debt over the past few years, most recently extending maturity dates of $4 billion in expiring debt out to 2020. MGM Resorts has also extended the maturity dates of its debt obligations over the past few years.<\/p>\n
\tNow, Las Vegas Sands is following suit.<\/p>\n
\tThe casino operator didn\u2019t provide much detail when it announced the refinancing plans Dec. 2. It declined to comment beyond a brief statement that the restructuring would extend maturity dates remove certain financial covenants.<\/p>\n
\tBloomberg News, citing unnamed sources, said Las Vegas Sands was using a consortium of banks to restructure about $3.25 billion of the obligations, much of which come due early next year.<\/p>\n
\tFarrell said the debt is covered by the company\u2019s Venetian and Palazzo hotel-casinos on the Strip and Sands Bethlehem in Pennsylvania.<\/p>\n
\tCompanies have different reasons for taking on debt. Caesars\u2019 debt load came about after the company was taken private by two private equity firms in a $30.7 billion buyout in 2008.<\/p>\n
\tFarrell said the company\u2019s \u201ctiming was compromised\u201d because the recession hit, driving down gaming company values. Caesars has been able to raise capital by leveraging pieces of the company\u2019s business. The most recent debt restructurings were backed by the under-construction Linq project and the Octavius Tower at Caesars Palace.<\/p>\n
\t\u201cCaesars is doing everything it can to raise more cash, push out maturities and try to weather the storm,\u201d Farrell said.<\/p>\n
\tMeanwhile, additional improvements to Las Vegas Sands\u2019 already well-cushioned financial profile might help as the casino operator looks toward additional foreign expansion. The company has targeted potential in other Asian markets (Japan and South Korea) and Europe (Spain).<\/p>\n
\tIn the United States, Las Vegas Sands was involved in casino expansion talks in South Florida in 2012 and has factored into recent discussions surrounding a potential casino in New York City.<\/p>\n
\tFarrell told investors recently that companies with both Macau and Strip resorts are best positioned for 2014.<\/p>\n
\t\u201cDestination gaming markets such as Las Vegas and Macau should continue to benefit from the global wealth effect, corporate conventions, and secular growth within Asian economies,\u201d Farrell said. \u201cWe believe the domestic regional gaming industry will see revenue growth of 1 percent to 2 percent in 2014 due to a combination of higher discretionary spend and lower industry supply.\u201d<\/p>\n
\tFarrell said he was concerned that the leisure travel segment will remain soft, suppressing any significant improvement in net gaming revenues.<\/p>\n