Christopher Palmeri
Just a year ago he was the third-richest man in the U.S., with a net worth topping $36 billion. Today, gambling magnate Sheldon Adelson is scrambling to save his Las Vegas Sands (LVS) from financial collapse. On Nov. 10, the company reported that Goldman Sachs (GS) had successfully arranged $2.1 billion in new capital, including an as-yet-undisclosed investment from Adelson himself. That would be the second time in two months Adelson has had to ante up personally. On Sept. 30 he paid $475 million out of his pocket (BusinessWeek.com, 10/1/08) for preferred stock in the company.
Las Vegas Sands also announced it was sharply cutting back its development, reducing capital expenditures by some $1.8 billion and putting off ambitious plans to build as many as eight more hotels on the Chinese island of Macau, near Hong Kong. The company said it will suspend work on a St. Regis condominium project it's building in Las Vegas. Instead, the company said it would focus on finishing a $5 billion resort it is building in Singapore that is due to open in late 2009 and a scaled-down version of a new casino it is building on the site of the old Bethlehem Steel plant in Pennsylvania.
The Las Vegas company reported a slight improvement in losses for the quarter, losing only $32 million on revenue of $1.1 billion, compared to a $48 million loss the prior year. In that time the company has opened new properties such as a Four Seasons resort in Macau.
The President Apologizes
The company's third-quarter earnings conference call started more than 30 minutes late, with company President William Weidner apologizing, saying "late-breaking events interceded." Following statements by other managers, Adelson—who was never identified by name—participated in a question-and-answer period with analysts. Adelson, 75, seemed at times unprepared for the call, referring at one point to recent statements from the Singapore government but then needing to find the particular news release before he could finish his point. The Singapore Tourism Board said on Nov. 7 that it would "facilitate the success" of the company's massive casino project there.
A cab driver's son from Boston, Adelson made his first fortune founding the Comdex computer trade show in Las Vegas. The event was a must-attend for techies for years and Adelson—who has said he doesn't use a computer himself—sold the business for some $860 million in 1995. Adelson is also an innovator in the casino industry. His Venetian resort, which opened in 1999, was designed to appeal to convention visitors with more spacious suites and in-room amenities such as fax machines.
In 2002, Adelson was among only a handful of operators, including his longtime rival Steve Wynn, who won the right to open new casinos in Macau. His Sands Macau resort was the first of the new wave of casinos to open there in 2004 and proved extraordinarily profitable. Adelson envisioned a gambling mecca he called the Cotai Strip, on reclaimed land nearby. His company now operates two casinos on that strip—a Venetian Macau and the recently opened Four Seasons—but plans to build several others with management partners including Starwood Resorts (HOT), Fairmont Raffles, and Hilton Hotels have now been put on hold.
Share Prices Fall 95% in a Year
Meanwhile, Adelson continued upping the ante in Las Vegas. In 2003 he added a new hotel tower next to the Venetian. Last December he opened a new 3,000-room resort, the Palazzo, in the face of a sharp slowdown in Vegas visitors.
Today Las Vegas Sands' debt totals more than $10 billion. Share prices have fallen 95% in the past year, to 8, from an all-time high of 148 in October, 2007. Adelson's 70% stake is worth about $1.5 billion. On Nov. 6 the company reported that it was in danger of violating covenants on its bank loans, and in the words of its auditor, PricewaterhouseCoopers, there were doubts as to the company's "ability to continue as a going concern."
Even the Macau miracle has slowed. Last year, Macau's gambling haul passed that of Las Vegas. But revenue at the 31 casinos there fell 3.8%, to $1.1 billion, in October. The Chinese government recently has been restricting visitors from the mainland in order to control currency flows and dampen speculation. Sighs Susquehanna Financial Group casino analyst Robert LaFleur: "The global economic slowdown, the massive development program, external pressure from the Chinese government—it's been an unfortunate convergence of very bad events."
Palmeri is a senior correspondent in BusinessWeek's Los Angeles bureau.
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