UPDATE 5-Las Vegas Sands shares drop on doubt over future

(Adds analyst comment, byline)

NEW YORK/LOS ANGELES, Nov 6 (Reuters) - Las Vegas Sands Corp LVS.N shares fell as much as 44 percent on Thursday after the casino operator's auditor said there are doubts about the company's ability to continue as a going concern.

“Their challenge is that they still have financing needs, but at the same time are in danger of violating leverage ratios,” said Nicholas Danna, senior research analyst at Sterne Agee.

Casino stocks have been punished over the past year as a gambling boom in Las Vegas has fizzled, tight credit markets have jeopardized growth plans and the Chinese government has acted to slow down the booming Macau market.

Sands shares, which have fallen from over $122 last December, were down about 32 percent at $7.88 in afternoon trading, above their low for the day of $6.52 and their all-time low of $4.32, posted on Oct. 28.

“The share price painted an ugly picture. Option traders clearly have bankruptcy on their minds,” said Andrew Wilkinson, senior market analyst at Connecticut-based Interactive Brokers Group.

Sands’ decline is a stunning reversal for the ambitious gaming company, which only last year opened the world’s biggest casino in Macau. Its principal stockholder and chief executive is billionaire Sheldon Adelson.

Before this latest sell-off, the stock had nearly tripled due to short-covering in the wake of comments last month that Adelson and his family intended to participate further in raising capital for Sands.

Based on current estimates, Las Vegas Sands expects it will not be in compliance with its maximum leverage ratio covenant for the fourth quarter and subsequent quarters, accounting firm PricewaterhouseCoopers LLP said in a regulatory filing on Thursday.

Noncompliance would result in defaults, which raises substantial doubt about the company’s ability to continue as a going concern, the filing said.

“No doubt there are serious balance sheet issues here, but we expect Las Vegas Sands to outline plans shortly and see the probability of resolution as high,” Jake Fuller, an analyst at Thomas Weisel Partners, said in a research note.


Las Vegas Sands said it is working with a financial adviser on a capital-raising program, but no assurances can be given that the program will be successful.

The casino operator has also filed a mixed shelf registration with regulators that would allow it to sell securities.

Sagging consumer spending power has hurt business in Las Vegas, where Sands operates the Palazzo and Venetian resorts, as well as the Sands Expo and Convention Center.

The company operates two casinos in Macau, where officials have recently restricted travel from mainland China, and has additional projects underway there as well as in Singapore and Bethlehem, Pennsylvania.

Should Adelson and his family not participate in capital raising for Las Vegas Sands, “the company may have a very difficult time getting the financing completed given its debt load, and the stock could decline significantly,” Morgan Stanley analyst Celeste Mellet Brown said in a research note.

“If he does (or puts in all the capital himself), we think the stock will trade higher, even if a capital raise is dilutive ...,” she said.

Last month, Forbes magazine recalculated the fortunes of some of the 400 wealthiest Americans and said Adelson has been among the billionaires hit hardest by the financial crisis, with his fortune dropping about $4 billion to around $11 billion. (Additional reporting by Doris Frankel in Chicago, editing by Gerald E. McCormick)