Bank loans for The Parisian signed ‘by Q1 2013’

Las Vegas Sands Corp. accepts recently underperforming in Macau mass-market gaming

Las Vegas Sands Corp. expects to finalise bank loans in the first quarter of next year toward the US$2.5 billion (19.97 billion patacas) cost of its The Parisian project.
The news was given by Kenneth Kay, the firm’s chief financial officer at the UBS and Deutsche Bank Gaming Investment Forum at the Global Gaming Expo in Las Vegas. G2E is a yearly sister event to the G2E Asia casino equipment exhibition and investor conference held in Macau.
“We anticipate finalising finance for The Parisian some time in the first quarter of 2013,” Mr Kay told analysts. “We’ve already had some preliminary conversations with our lenders and have received some very favourable feedback.”
The Parisian – designed to be a resort with mass-market appeal to complement the neighbouring The Venetian – will have a half scale replica of the famous Paris landmark the Eiffel Tower. Ground preparation work on its Cotai Lot 3 site could begin as early as November, the company chairman Sheldon Adelson said a fortnight ago at the opening of Phase IIA of its latest Cotai venue, Sands Cotai Central.

Cash contribution

LVS will spend up to US$900 million of its own cash on the scheme, the company’s president and chief operating officer Michael Leven said at that launch.
Mr Kay told the U.S. investment forum most of the overall capital expenditure on The Parisian will be in 2014.
“In 2013 we will spend approximately US$600 million on The Parisian and then in 2014 about US$1.2 billion. The remainder of the spending will be in 2015 and then the tail into 2016,” he stated. It will take LVS’s total investment in Macau to around US$9 billion.
Mr Kay explained that once completed, the French-themed property would be another component in what amounts to a single LVS ‘mega resort’ on Cotai. That’s because Sands Cotai Central, The Four Seasons Macao (and its The Plaza casino) along with The Venetian Macao, will all be joined by bridges and walkways.
“Once The Parisian is up and running in Macau it [LVS’s Cotai real estate] will probably be close to 32 million square feet [297,000 square metres] of integrated resort. The property is really all under one roof, because they’ll [the components] be connected with air conditioned bridges and walkways.”
Mr Kay was asked by analysts how confident the firm was about opening The Parisian in 2015-16. It faces the headwind of Macau’s table cap and requests to the government by competing projects with similar construction timetables for precious gaming table allocation.

Gaming underperformance

“It seems like they [new Cotai schemes] are a little bit bunched together in the 2015 to 2016 timeframe,” agreed Mr Kay. “We have a project – The Parisian – that we’d like to get finalised by then. So we will gladly start on the piling process and start spending on development toward the latter part of this year – hopefully in the next month or couple of months,” he stated.
“In the meantime we’ve got the only new property in the Cotai Strip [Sands Cotai Central] when Cotai is becoming the new centre of gravity for Macau,” he said. “Between now and then [2015] we expect to capture more than our fair [market] share, given that we have the hotel rooms.”
The firm says that when Sands Cotai Central is completed – more hotel capacity is to be added – the company will have 9,324 hotel rooms in the market at four- and five-star grade – 39 percent of Macau’s capacity in that segment.
But Mr Kay admitted that in the second quarter local unit Sands China Ltd was underperforming relative to its Macau competitors on gaming win per unit per day in the mass table games market and the slots and electronic table games segment.
According to company data, at the end of that period Sands China had 26 percent of the mass-market tables (826 out of an estimated 3,132 total) and 26 percent of the slots and ETGs (4,380 out of 17,035).
“…with the exception of The Plaza, most of our [Macau] properties have underperformed what the average in the marketplace is,” stated the CFO.
“So we think we’ve got great opportunities to grow the business organically, and as our table averages increase up to what that marketplace average is, those will be significant contributors to Sands China’s EBITDA going forward,” added Mr Kay.