Sands Storm: Las Vegas Giant in Trouble

Nov. 10, 2008— -- The latest sign that Las Vegas bets are buckling under the tough economy? One of the strip's marquee casino operators is on the ropes.

Las Vegas Sands Corp., the owner of the Venetian Hotel and Casino, has warned in a filing with the Securities and Exchange Commission that if it can't raise the money it needs to meet certain debt agreements, it could "raise a substantial doubt about our ability to continue as a going concern" -- or, in other words, to keep doing business.

A Sands spokesman declined to comment, noting that the company would be releasing its financial quarterly results soon. Sands has not set an official date for the release.

In a statement to the press last month, the company said that it was working with an investment banking firm on a plan to raise more money.

The pain in the casino industry has been widespread, as would-be gamblers tighten their belts and stay home instead of hitting the slots. Gaming revenue is down sharply, and so are stock prices: Sands has seen its share value plummet in the last 12 months, from a high above $120 to just over $7 by the close of trading on Friday.

Likewise, shares of MGM Mirage were trading above $90 last October but have since fallen to just above $12. Trump Entertainment Resorts, which last week posted $139.1 million third-quarter loss, saw its share values plunge from above $8 last November to below 60 cents on Friday.

But Sands, said research analyst Amit Kapoor, is the only major casino company that has reported that it is in danger of breaking its debt agreements, which require that the company have a certain amount of cash in proportion to its outstanding loans.

Kapoor, who works for Gabelli and Company -- the brokerage arm of GAMCO Investors, which owns stock in Sands -- said that a Sands bankruptcy was unlikely.

"This is a post-Halloween market and people like to think of scary things," he said, "but I think the prospect of bankruptcy is a scary but a highly improbable event."

If Sands can't raise the money it needs, he said, the company may seek to sell assets such as casino properties.

Las Vegas Casinos Feel Economic Pain

The company could also try to renegotiate its loan agreements, but that's hard to do today given the state of the credit markets, Kapoor said.

"All would have been great and hunky dory were the credit markets not frozen," he said.

Sands has casino developments planned or already underway in Macau, China; Bethlehem, Pa.; and Singapore. Kapoor said that the company's financial straits may sideline one or more of those projects. That's a big problem, he said, in an industry where developing new properties and upgrading existing ones is key to success.

"To stay relevant, you have to have other projects in the pipeline, build quickly and build better than the guy next door," he said.

If Sands ultimately does postpone or halt some projects, it won't be alone: MGM already has announced it is postponing developments in Las Vegas and Atlantic City, while Boyd Gaming is delaying its own Las Vegas project.

Among the biggest losers to emerge from Las Vegas' losing streak is Sands CEO Sheldon Adelson, who recently invested $475 million of his own money to bolster the ailing company.

The billionaire has lost at least $16.6 billion this year thanks to his Sands holdings, according to analysis by Steven Hall & Partners, a compensation-consulting firm in New York.

Part of the reason for Adelson's massive losses is his out-sized investment in the company: Individually and through family trusts, Adelson owns nearly 70 percent of Sands -- much more than other big-time, billionaire CEOs.

For instance, legendary investor Warren Buffet's holdings in Berkshire Hathaway amount to a 28 percent stake in the investment company while Larry Ellison, the CEO of the software company Oracle, has a 22.6 percent stake in his company.

Why is Adelson's stake so large? Steve Fischer, the author of the 2005's "When the Mob Ran Vegas" and the upcoming "Showgirls' Stories," said it's about ego and control.

"Sands Corp is him," Fischer said in a recent interview. "He thinks of Sands Corp. the same way he thinks about himself -- there are no other decision makers."