|By Howard Stutz, Las Vegas
Review-JournalMcClatchy-Tribune Regional News
Dec. 1, 2009--An initial public stock offering in a subsidiary of Las Vegas Sands Corp. hit a snag Monday when shares tumbled 10.2 percent on their first day of trading on the Hong Kong Stock Exchange.
Still, Las Vegas Sands said it raised $5 billion in debt and equity financing in Asia and will use a portion of the proceeds to restart and complete construction of a resort and casino complex on Macau's Cotai Strip.
In a statement, the company said it listed 30 percent of its Macau holdings through Sands China Ltd. on the Hong Kong Stock Exchange in an IPO that raised $2.5 billion, as well as $600 million in pre-IPO financing.
Shares of the company fell after news last week that Dubai World may face a possible default on more than $60 billion in long-term debt repayments.
Las Vegas-based independent strategist Jonathan Galaviz told Bloomberg News that the Dubai World matter hurt consumer confidence and contributed to an unfavorable view toward tourism-related companies.
"Half of Dubai's story is tourism," Galaviz said. "There will probably be some negative sentiment toward tourism assets globally, such as casino operations, as Dubai gets squared away."
Las Vegas Sands Chairman and Chief Executive Officer Sheldon Adelson dismissed the opening-day price drop as a short-term slump.
Adelson, 76, said the company is committed to developing Macau's Cotai Strip into a full-service gaming venue, despite concerns that the world economy has not recovered from last year's credit crisis.
"There is no reason to think a little bump in the road is going to last," Adelson told reporters in Hong Kong. "It's not going to last, it's going to straighten out. We're in it for decades."
Las Vegas Sands said it would use $500 million of the IPO proceeds, along with $1.75 billion in project financing, to complete the Cotai Strip site near the Venetian Macau that will house the combined Shangri-La, Traders and Sheraton resort complex.
"Our ability to add more properties to the Cotai Strip will enhance visitation from all parts of the Asia-Pacific region and significantly increase the overall length-of-stay in Macau," Adelson said.
Construction of the 13.3 million-square-foot complex was halted a year ago when financing dried up and Las Vegas Sands ran into financial difficulties, nearly having to file bankruptcy. The Cotai Strip project is 65 percent complete, the company said.
The company said development would be finished in phases. Phase one is expected to open in June 2011 with 3,700 hotel rooms and suites from the Shangri-La, Traders and Sheraton hotel brands. Theater, retail, gaming and convention facilities are included.
The second phase, planned for December 2011, will house a 2,300-room Sheraton hotel tower, as well as other nongaming amenities. Timing for completion of a third phase to include a St. Regis hotel and serviced apartments has yet to be determined.
Adelson said the IPO's completion could still bring an additional $250 million in proceeds should the 10 percent overallotment of shares be exercised by the underwriters. Las Vegas Sands will use a portion of the proceeds to increase its balance sheet and remove debt covenant concerns related to the company.
One Hong Kong stock analyst told the AFP News Service the share price of Sands China will likely be "under pressure for some time" because of its heavy debt.
"The drop is mainly due to the valuation of the company; it's too high," said Ernie Hon, a strategist at ICBC International in Hong Kong.
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