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Las Vegas Sands outlines recapitalization plan

Las Vegas Sands Corp. on Tuesday unveiled details of its $2.14 billion capitalization plan to right the company’s financial woes, but a regulatory filing shows there may be deeper problems at the casino company.

The company will receive a $525 million investment from the family of Chairman and Chief Executive Officer Sheldon Adelson and will also sell $1.62 billion in additional shares to avoid defaulting on several loans and to fend off the possibility of bankruptcy.

However, in the company’s 10-Q filing Monday with the Securities and Exchange Commission, Las Vegas Sands told investors that there is conflict between Adelson and members of the senior management team.

According to the passage, there has been “a loss of confidence” by certain senior management members in the management of the company. Las Vegas Sands’ board of directors adopted several governance changes because of the disagreements.

One Wall Street analyst, who asked not to be named, said the conflict is between Adelson and Las Vegas Sands President Bill Weidner, who has headed the management team that includes Executive Vice President Brad Stone and Senior Vice President Rob Goldstein for more than a decade.

Las Vegas Sands spokesman Ron Reese, in response to questions about the corporate governance changes, said senior management recommended the policies to the board of directors.

“In these times, it is only prudent to have the board work in closer consultation with senior management,” Reese said. He would not discuss any specifics from the 10-Q passage.

On Tuesday, the day after Las Vegas Sands said it was going to raise $2.14 billion and was suspending construction of some of its development projects on the Strip and in China, hoping to save $1.8 billion, the company offered investors about 181.9 million shares of common stock at $5.50 each in an effort to raise the $1.62 billion.

Adelson, 75, the company’s founder who controls almost 65 percent of Las Vegas Sands’ outstanding shares personally and through family trusts, agreed to kick in a $525 million investment through a purchase of 5.25 million shares of preferred stock and about 87.5 million shares of common stock.

It’s the second investment into the company by Adelson in two months. He injected $475 million on Oct. 1.

Las Vegas Sands, which operates The Venetian and Palazzo on the Strip and three casinos in Macau, had almost 355.4 million shares outstanding as of Tuesday, which are traded on the New York Stock Exchange. In total, the offering along with an overallotment, the conversion of senior notes, and a full conversion of warrants, could result in 460 million additional shares of Las Vegas Sands becoming available to the public, one analyst said.

“In this market, capital comes at a high price, and Las Vegas Sands is certainly paying for it,” Stifel Nicolaus Capital Markets analyst Steven Wieczynski said in a note to investors. “In short, this will have a significant impact on earnings per share going forward.”

Susquehanna gaming analyst Robert LaFleur said the company’s financing and liquidity concerns have hung “like an anvil for the past fortnight.” He said the steps being undertaken could resolve some issues.

“It looks as if Las Vegas Sands will live to fight another day,” LaFleur told investors.

After first announcing the stock offering before the markets opened Tuesday morning, Las Vegas Sands issued a second statement, saying the company would not seek shareholder approval for the sale.

In a statement, Las Vegas Sands said, “After a careful review of the facts, the members of the audit committee of the company’s board of directors have determined that any delay caused by securing shareholder approval prior to the issuance of these shares of common stock in connection with the conversion of the convertible senior notes would seriously jeopardize the ability to complete the offerings as well as the financial viability of the company.”

The market had a mixed reaction to the offering. Shares of the company fell 17 percent on the outset of trading and continued downward for much of the day. Las Vegas Sands closed at $5.34, down $2.66, or 33.25 percent. Almost 51 million shares were traded.

Shares of Las Vegas Sands once traded at $148 but have plunged more than 90 percent this year because of the sinking global and national economy, which has caused casino gaming revenues to decline. On Tuesday, Las Vegas Sands had a market capitalization of $1.9 billion, down from $51 billion in October 2007.

In a filing last week with the SEC, Las Vegas Sands said it was in jeopardy of missing certain financial covenant requirements and needs to raise more capital.

The company disclosed a letter from its auditor, PricewaterhouseCoopers, in which the accounting firm wrote that a default would raise “substantial doubt about the company’s ability to continue as a going concern.”

Adelson was considered America’s third-richest person earlier this year but fell to 15th on the Forbes list after the massive stock value decline. At the end of October, a New York compensation consulting firm estimated Adelson’s net worth had fallen by more than $16.6 billion for the year.

The announcement that construction was being suspended at the St. Regis Condominium Tower on the Strip and several of the company Cotai Strip projects were being shelved, was met with positive reaction on Wall Street.

“While we believe Las Vegas Sands’ bold vision could ultimately work and the stock may stabilize near term should it finish its capital raise, we think it will remain an execution story until it can start to deliver on its plans,” Macquarie Capital gaming analyst Joel Simkins told investors.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871.

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