Macau casinos go from boom to gloom

By Dominic Whiting - Analysis

HONG KONG (Reuters) - When multi-billionaire Sheldon Adelson unveiled a gleaming model of casinos and plush hotels in a dimmed Macau room nearly four years ago, he promised a $15 billion Asian "neon alley" to rival Las Vegas.

But the vision Adelson said came to him in a dream could remain largely idle reclaimed land for a few years longer as the financial crisis and slowing gaming revenue puts him billions of dollars short of the funding he needs to complete the project.

Left in the dust of Macau's Cotai Strip are the hopes of some of the world's biggest hotel chains, such as Starwood Hotels (HOT.N) and Intercontinental Hotels (IHG.L), which imagined a bustling center of fun and conferences.

"It's all doom and gloom," said a construction executive at a rival casino project in Macau, who asked not to be identified in making comments about a competitor.

"There are going to be some mass cullings on building sites."

Hampered by steep construction costs, frustrated by Chinese visa restrictions and squeezed by tour operators asking high commissions to ship in gamblers, Macau casinos have had a tough time in the last year.

Now Adelson's Las Vegas Sands (LVS.N) is struggling to fund projects because falling revenue from Las Vegas means it risks breaching U.S. loan covenants, which tie debt levels to earnings. Banks could demand early repayment.

The firm, stretched by a casino project in Singapore, suspended construction on its Macau expansion and said on Thursday it was laying off most of the 11,000 construction workers on the projects.

It also said it was in talks with a syndicate of banks to raise between $1.5 billion and $2 billion in project finance but gave no timetable.

"We would not have suspended if we could see clarity on how long it would take to raise the funds," Stephen Weaver, the firm's Asia president, told reporters at the Venetian Macao.

The loans come on top of some $2.1 billion in fresh equity raised by Las Vegas Sands this week, of which about half will come from Adelson. The other half will from a public share offering priced on Tuesday at $5.50 each for shares that were trading at $122 in December. The stock slide meant Adelson, the son of a taxi driver, lost $4 billion of wealth in September, Forbes says.

"The plan to develop the Cotai Strip in three years time was overly aggressive," said Credit Suisse analyst Gabriel Chan. "But it's not a demand problem, more a financing problem."

Macau is forecast to notch up nearly $14 billion in gaming revenue this year, a gain by nearly a third on 2007, despite a recent slowdown as China cut back on visa approvals.

Beijing has become nervous about the territory's impact on society and its use by corrupt officials to launder money, analysts say.

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