|By Matt Assad, The Morning Call,
Allentown, Pa.McClatchy-Tribune Regional News
Oct. 25, 2008 - On a day when Las Vegas Sands stock dived to a new low and the CEO set out to find $2 billion to stabilize his company, a Wall Street analyst said the Sands Casino Resort Bethlehem will probably open on schedule, but it could be a long time before anyone can shop on the site.
Wachovia securities analyst Brian McGill said Friday that Sands' difficulty in getting credit to finish its massive projects dictates that the company halt nongaming construction until the global financial crisis passes. He said there's no telling how long that could take.
His comments came a day after a source said Sands abruptly stopped building its south Bethlehem shopping mall, hotel and events center to focus on the casino, which is to open by July 1.
"It makes perfect sense for them to continue work on the casino while halting all noncasino-related construction," said McGill, who covers the gaming industry for Wachovia. "The casino is the money-maker. The rest of that development may have to wait until credit is available, probably after this crisis eases."
Despite a swoon that saw Sands stock drop to $6.32 Friday from $133.65 a year ago, McGill said there's little danger of Sands failing. Its billions of dollars in marketable assets make that unlikely, he said.
Company officials have declined to comment on the financial status of the Bethlehem project this week, but billionaire Chief Executive Officer Sheldon Adelson announced Friday he is trying to raise $2 billion from Asian banks to finish Sands' project in Macau, China. Next week, Sands is expected to report its quarterly earnings and has promised to give updates on plans for each of its projects.
McGill said Sands' problem is getting billions of dollars in credit in a financial market in which there is no credit to give.
Sands did secure $5 billion worth of funding last year, but it is currently involved in $17 billion in development that includes its $800 million project in Bethlehem, $12 billion to build several casinos in Macau and $4 billion worth of development in Singapore.
So the logical move, McGill said, is to halt all noncasino construction and divert all the available money to the three casinos -- one in Bethlehem and two in Macau -- that are due to open in 2009.
Exactly when Sands can get back to building the shopping mall of 200,000 square feet, the 300-room hotel and 50,000-square-foot events center in Bethlehem might hinge on a revival of the credit markets, McGill said.
The mall had been scheduled to open next summer, the hotel next September and the events center by Oct. 1.
Bethlehem Mayor John Callahan did not return phone messages Friday. Earlier this week, he said it's understandable that Sands is being affected by the credit crisis, but he's confident the Las Vegas casino giant will finish the entire project.
Pennsylvania Gaming Control Board spokesman Richard McGarvey said the "statement of conditions" Sands signed to get one of 14 gaming licenses requires the company to build the hotel and mall. The events center was not included in the agreement.
If Sands wants to change those conditions, it must file for permission from the gaming board and go through public hearings.
"We have not received any request for changes," McGarvey said. "We intend to hold them to all the conditions that were agreed upon."
McGarvey said if Sands is merely delaying its plans, the company would probably not need permission because the agreement lists no time frame.
Sands' current troubles stem from bad luck. With its stock price at a historic high in 2007, it launched $17 billion worth of casino development in Bethlehem and Asia. The financial crisis hit, leaving people with less disposable income and causing revenues at Sands' high-priced resorts to tumble.
The worsening crisis drove up construction costs, and the credit Sands needed to continue expanding dried up.
Meanwhile, China sought to cool runaway casino development by limiting how often its people can visit Macau first to once a month, then to once every three months.
Though a Baltimore analyst said Friday that investors are worried Sands is headed for bankruptcy, McGill believes Sands will make it through the trouble.
While the company might have difficulty getting credit to advance all of its projects now, in a worst-case scenario it could avoid bankruptcy by selling its Macau shopping mall, which was once valued at $7 billion, or a similar mall in Singapore.
Also, Adelson's 65 percent stake in the company insulates Sands from any threat of a hostile takeover by someone trying to buy a majority of the company stock.
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