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Gaming stocks end mostly down

Las Vegas Sands Corp. tried to soothe the investment community today by announcing plans for a capital raising program to benefit the casino operator that could include another cash infusion by chairman and majority stockholder Sheldon Adelson.

It didn’t help.

Shares of Las Vegas Sands (LVS) fell 27 percent at the outset of trading today on the New York Stock Exchange, before settling back to close at $6.32, a decline of $1.89 or 23.02 percent. At one point, the company hit a new all-time low of $5.80 after reaching a low of $8.03 Thursday. Las Vegas Sands began the week at a little more than $12 a share. Roughly 20.7 million of the company’s shares were traded, more than three times the average daily volume.

Stifel Nicolaus gaming analyst Steven Wieczynski said in a note today that investors might be losing confidence in the company.

“With credit markets in turmoil, investors believe Las Vegas Sands is in jeopardy of running out of cash and going bankrupt,” Wieczynski said. “We believe management has done nothing to ensure investors that the company will emerge from this financial crisis. We believe that is why investors therefore have sold the name.”

MGM Mirage (MGM) was the only casino operator to have a positive day in the stock market. Shares of the company, which operates 10 resorts on the Strip, closed at $11.20, up 35 cents or 3.23 percent on the New York Stock Exchange.

The share prices of other gaming companies, however, declined.

Wynn Resorts (WYNN) closed at $36.59 on the Nasdaq National Market, down $5.79 or 13.66 percent. The company reached a new 52-week low for the second straight day.

Macquarie Capital gaming analyst Joel Simkins today downgraded Wynn Resorts to “neutral,” saying that the $2.2 billion Encore at Wynn Las Vegas, which opens at the end of the year, will face significant challenges.

“Although we think Encore will open on time, on budget and fully complete, it is opening into the eye of a hurricane,” Simkins said. “We have reduced our expectations for this expansion as well as (Wynn Las Vegas).”

Simkins said reduced room rates, a lower demand for international customers and high rollers and negative margin leverage will impact the company.

“We see the opening of (MGM Mirage’s $9.2 billion) CityCenter and (the $2.9 billion) Fontainebleau in late 2009 as exacerbating the challenges to Las Vegas,” Simkins said.

Shares of other gaming companies were down today. Boyd Gaming (BYD) closed at $4.01, down 19 cents or 4.52 percent; Pinnacle Entertainment (PNK) was $2.97, down 99 cents or 25 percent; Ameristar Casinos (ASCA) closed at $5.91, down 32 cents or 5.14 percent; slot machine maker International Game Technology (IGT) was at $10.85, down 35 cents or 3.12 percent; and Bally Technologies (BYI) was at $16.57 down 90 cents or 5.15 percent.

Popular CNBC stock market commentator Jim Cramer, in a posting on his Real Money message board, expressed his dissatisfaction with the gaming industry.

“Frankly I don’t see how MGM Mirage or Las Vegas Sands makes it,” Cramer said. “Vegas is getting killed and the Chinese are being really tough about Macau. (MGM Mirage majority shareholder Kirk) Kerkorian obviously will do everything he can to keep this going but so did Adelson. I am very bearish about everything Vegas.”

Before the markets opened, Las Vegas Sands issued a one-paragraph statement, saying the Las Vegas and Macau casino operator was working with an investment banking firm to develop a capital raising program for the company.

The company said Adelson and his family, which controls almost 70 percent of Las Vegas Sands, intend to participate in the program. Adelson, 75, loaned Las Vegas Sands $475 million on Oct. 1 through convertible senior notes to help the company meet liquidity requirements and avoid the triggering of a $5 billion loan covenant.

“The company will announce further details of the program in the very near future,” according to the statement.

Thomas Weisel Partners’ Jake Fuller said the company’s announcement Ñ while short on details Ñ may be viewed as a very modest positive.

“While there is a very real balance sheet risk here, we argue that Las Vegas Sands will be able to dodge a crunch with an infusion from Mr. Adelson, a covenant amendment, securing of project financing or delay of Cotai projects,” he wrote.

Jefferies & Co. gaming analyst Larry Klatzkin believes Adelson will invest a total of at least $1 billion into Las Vegas Sands by the end of the year. Klatzkin said the company is committed to completing three major projects: it’s Cotai Strip developments currently under construction, the $675 million Sands Casino Bethlehem in Pennsylvania and the $4 billion Marina Bay Sands in Singapore. All three projects are expected to open during 2009.

“We still believe in Las Vegas Sands,” Klatzkin said in a note to investors. “We believe Mr. Adelson will commit additional money to the company.”

Las Vegas Sands is seeking smaller-scale financing to complete individual projects on the Cotai Strip region of Macau. The company had been looking for $5.25 billion in financing, of which $3.5 billion would be directed to Macau.

“We believe the biggest overhang on Las Vegas Sands has been its deteriorating financial position,” Wieczynski said.

In the past month, Las Vegas Sands was passed as the world’s largest casino company by marketshare value. Wynn Resorts is now the biggest, followed by MGM Mirage.

Sands said Wednesday it would sell its Four Seasons apartment hotel in Macau as a co-operative after Macau’s government approved a legal separation of the Four Seasons from the rest of Sands’ developments.

Many casino companies have started to feel repercussions from the credit crisis. Boyd Gaming Corp. recently postponed work on its $4.8 billion Echelon resort in Las Vegas. The company, whose ratings were lowered by Moody’s last week, also suspended its annual cash common dividend.

And on Wednesday MGM Mirage’s default rating was downgraded by Fitch Ratings partly due to the company’s difficulty paying for the $9.2 billion CityCenter complex in Las Vegas. The company has reached a deal with lenders to change the terms of $7 billion in debt.

On Thursday Ameristar Casinos Inc. disclosed in a filing with the Securities and Exchange Commission that it had arranged an interest rate swap with U.S. Bank National Association in order to change the annual interest rate on a credit agreement from floating to fixed. The casino operator said the transaction would lower the risk associated with the rate for $600 million of senior secured revolving debt remaining under the credit facility.

 

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

The Associated Press contributed to this report.

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