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Las Vegas Sands betting on Singapore
NEW YORK |
NEW YORK (Reuters) - Las Vegas Sands Corp (LVS.N), which will open its $5.5 billion Singapore casino resort in late April, remains uncertain about the resort's financial performance, the company's chief operating officer said on Wednesday.
Michael Leven, speaking at the Reuters Travel and Leisure Summit, said Sands will wait another 30 days before giving its board a fiscal plan, while it observes Genting Singapore (GENS.SI), which opened the city-state's first casino resort on February 14, the start of the Chinese New Year.
"We are not disappointed in what we're seeing in Genting, but it's too early to assess," said Leven, who is also president of Sands.
Sands will need to generate at least $400 million in earnings before interest, taxes, depreciation and amortization (EBITDA) from the fully ramped-up Singapore resort in order to meet debt covenants, he said.
Sands Chief Executive Sheldon Adelson said in earlier interviews that the resort, Marina Bay Sands, could generate an annual profit of $1 billion.
During the worldwide recession and credit crunch, Sands skated close to defaulting on its debt, sending its shares to a record low of $1.38 in March. They now trade around $16.
Leven said Sands, which is based in Las Vegas, plans to renegotiate with its lenders, probably before the end of the year.
"We're accumulating cash ... the only risk is if Singapore doesn't do well," he said. "We have to do $400 million in EBITDA to clear covenants. If we don't do that, we've made a bad investment in Singapore."
Sands currently operates the Palazzo and Venetian resorts on the Las Vegas Strip, casino-resorts in China's Macau, and a casino in Pennsylvania.
Its bonds and notes carry junk ratings.
MERCEDES AT CHEVROLET PRICES
Business is starting to pick up in Las Vegas, Leven said though he expected revPAR, a combination of revenue and occupancy used as a barometer of hotel industry health, to drop this year as operators compete for hotel customers.
"If you are going to sell automobiles like Mercedes you can't sell them at Chevrolet prices," Leven said. "In the hospitality business you can. I think we have met the enemy and they are us when it comes to holding our price structure."
As Las Vegas properties lower their rates, clientele shifts to lower-spending customers and they risk driving away high rollers, Leven said.
Macau, the only area of China where gambling is legal, saw its casino revenue rise 63 percent from a year earlier to $1.8 billion (14 billion patacas) in January, according to an analyst's report that cited the Portuguese news agency Lusa.
Leven does not believe that kind of growth is sustainable, noting that Sands agrees with the Chinese government's target for annual growth of 10 percent to 12 percent.
"You don't want bubbles," he said. "I think they'd try to moderate it in some way although I don't know how."
Beijing has in the past restricted the number of visas issued to mainland Chinese wishing to visit the gambling enclave.
Leven said he would not expect tighter monetary policy in China to have a big impact on the Macau operations noting the market's size and the customers preference for using cash, not credit, to gamble.
Sands expects to begin selling condominiums at its Macau Four Seasons property through a co-op structure -- which will bring in north of $1 billion, Leven said.
Macau currently accounts for about 70 percent of Sands' earnings, but that will drop to around 50 percent once the Singapore resort is fully up and running. Las Vegas will account for just 10 to 15 percent of earnings, the COO said.
(Reporting by Deena Beasley, additional reporting by Dena Aubin; editing by John Wallace, Leslie Gevirtz)
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