Junk-rated Las Vegas Sands Corp., the casino operator controlledby billionaire Sheldon Adelson, is getting investment-gradetreatment from banks as cash flow from its properties in Asiaoutpaces those in the U.S.

Lenders participating in a S$4.6 billion ($3.6 billion) creditfacility dropped demands that the Las Vegas based company use anyexcess cash at the end of its financial year to reduce the loan'soutstanding balance, two people familiar with the matter said onJune 4. Typically, only high-grade borrowers are awarded suchterms.

The perception of Las Vegas Sands's credit quality is improvingas its Asian casinos benefit from economies in the region that areexpanding faster than the rest of the world. The company said itsfirst-quarter casino revenue in Singapore, where it runs the2,561-room Marina Bay Sands, increased 51 percent to $701.3million, almost 4.5 times the $158.7 million of revenue from itscasinos in Las Vegas.

“Marina Bay Sands has been an incredible success for thecompany, the property has done much better than anyone expected,”Aaron Fischer, the Hong Kong-based head of consumer and gamingresearch at CLSA Ltd., said in a telephone interview.

Marina Bay Sands, home to an ArtScience Museum showcasing theworks of Andy Warhol, restaurants from celebrity chefs Mario Bataliand Daniel Boulud, and a hotel that averages 98 percent occupancyat $341 a night, has bolstered growth in Singapore.

The loan for Marina Bay Sands Pte, Las Vegas Sands's Singaporeunit, will pay interest at a rate of 185 basis points more than theSingapore dollar swap offered rate. The margin is 40 basis pointsnarrower than what the company paid to borrow $3.2 billion inNovember, and 65 basis points less than its cost for $1.4 billionin 2010, according to data compiled by Bloomberg.

The 2010 loan was quoted at 96.9 cents on the dollar yesterdayto yield 3.73 percent, Bloomberg data show.

Proceeds will be used to refinance debt and the loan may besplit into a S$4.1 billion term facility that matures in six yearsand a S$500 million revolving credit facility due in 5.5 years, thedata show. Marina Bay hired DBS Bank Ltd., Oversea-Chinese BankingCorp., Malayan Banking Bhd. and United Overseas Bank Ltd. as globalcoordinators for the financing in March, according to data compiledby Bloomberg.

The facility has since attracted four banks to share theunderwriting risk in marketing — Bank of China Ltd., SumitomoMitsui Banking Corp., Standard Chartered Plc and CIMB GroupHoldings Bhd. — as well as about 10 others in widersyndication.

19^th RichestPerson

Val Chua, a spokeswoman for Marina Bay, didn't respond toe-mails seeking comment on the terms of the financing. Bob Harayda,Marina Bay's chief financial officer, didn't return two telephonemessages and an e-mail seeking comment.

Adelson, 78, is the world's 19th-richest person with a fortuneof $20.7 billion, according to data compiled by Bloomberg. Hisfirst jobs included paper boy, ad salesman and court reporterbefore he made his first fortune in trade shows.

He parlayed that windfall into the Las Vegas Sands casinobusiness, which includes the Venetian Macau in China andSingapore's Marina Bay. His wealth has risen 7.7 percent this year,or $1.5 billion.

Macau, the only place in China where casino gambling is legal,overtook the Las Vegas strip as the world's biggest casino marketin 2007. The number of Chinese visitors to the former Portuguesecolony rose 22 percent to 16 million last year, helping to increasegambling revenue 42 percent to 268 billion patacas ($33.5 billion),according to Macau's Gaming Inspection and Coordination Bureau.

Marina Bay's popularity among gamblers in Asia helped Singapore,Asia's second-smallest country after the Maldives, attract a record13.2 million visitors in 2011. The island's other integratedresort, Genting Singapore Plc, has also lured tourists.

Las Vegas Sands's sales may reach $12.4 billion this year and$14.9 billion in 2013, CLSA forecasts. The company's revenue lastyear was $9.4 billion, a 37 percent increase from 2010, and netincome was $1.56 billion, up from $599.4 million, according to datacompiled by Bloomberg.

KDP Investment Advisors Inc. analysts led by Barbara Cappaertestimate Las Vegas Sands's 2012 total debt to Ebitda ratio will be2.2 times as of Dec. 31. That compares with an industry median of5.5 times, according to an April 26 report.

For Las Vegas Sands, “Asia remains the star,” said Cappaert, whoforecasts free cash flow of $962.1 million in 2012. “Free cash flowshould remain strong, even after new investment spending.”

'Top Pick'

Las Vegas Sands stock rose 2.4 percent yesterday to $46.10.That's a gain of 7.9 percent this year and below the April 12 highof $61.05.

The company “is our top pick among our U.S.-listed gamingcoverage given the strong free cash flow generation in Macau andSingapore and an estimated free cash flow yield of 8 percent for2013,” CLSA's Fischer said.

Moody's Investors Service rates Las Vegas Sands Ba2, thesecond-highest non-investment grade. Its senior secured debt isalso rated Ba2, having been raised from Ba3 in November, accordingto data compiled by Bloomberg. Three years ago, the debt was ratedB3.

The request that lenders remove the so-called cash sweepmechanism clause has meant banks have had to again seek approval tolend to the facility from their internal credit committees, thepeople familiar with the matter said on June 4, asking not to beidentified because the details are private. Most banks have agreedto its removal, the people said.

“On a leveraged facility it's standard for banks to seek tobring down the loan quicker than the scheduled amortization byrequiring the borrower, at the end of its financial year, pre-payany excess cash over and above its requirements and therefore bringdown the overall maturity profile of the bank debt,” said DavidIrvine, a Hong Kong-based partner at Linklaters LLP who specializesin structured lending. “The closer a borrower gets to being aninvestment-grade corporate with stable cashflows, the less needthere is for such a clause and it can fall away.”

The starting interest margin of 185 basis points that Marina Baywill pay on the loan is based on its consolidated debt to earningsbefore interest, taxes, depreciation and amortization of more than3.5 times, according to a document obtained by Bloomberg News andconfirmed by a person familiar with the matter.

The interest falls to 165 basis points once the ratio drops tobetween 2.5 and 3.5 times, and declines to 145 once the ratioranges from 1.9 and 2.5 times. It becomes 115 once the ratio isless than or equal to 1 time, according to the document.

'Decision Process'

Wynn Macau Ltd., the Hong Kong-listed unit of billionaire SteveWynn's Las Vegas-based Wynn Resorts Ltd., is offering to pay astarting margin of 250 basis points more than Libor for a loan of$1.5 billion it's currently seeking from banks in Asia, a personfamiliar with the matter said on May 24.

The margin will be 250 basis points for leverage of 4.5 times ormore, 225 for 4 to 4.5 times, 200 for 3 to 4 times and 175 for lessthan 3 times, the person said. Banks pledging $200 million will bepaid an upfront fee of 200 basis points and there is a so-calledearly bird fee of 12.5 basis points for banks joining by tomorrow,the person said.

Wynn Resorts is rated Ba2 by Moody's, the same as Las VegasSands. Its Macau unit plans to spend $4 billion on a new resort inthe former Portuguese colony financed by loans, debt and cash, Wynntold reporters on June 5 after Wynn Macau's annual shareholdermeeting.

Caesars Entertainment Corp., the most leveraged big U.S. casinooperator and the only one without a presence in Asian gamingmarkets, is paying a margin of 525 basis points for bank loanssigned in March, according to data compiled by Bloomberg.

“Las Vegas Sands is an aggressive, large-scale global developer,so the question is how much cash the company wants to retain forpotential future projects, to distribute to shareholders, or to paydown debt,” Michael Paladino, a senior gaming analyst at FitchRatings in New York, said on June 5. “That's a nice decisionprocess to have.”

Bloomberg News

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