Source : Bloomberg.com, November 10, 2008
Link- http://tinyurl.com/3sfwdo
Nov. 10 (Bloomberg) -- Singapore's government may form a venture with CapitaLand Ltd. to take over one of the island's two casino-resorts if Las Vegas Sands Corp. fails to stave off loan defaults, CIMB-GK Research Pte said.
Las Vegas Sands, the gaming company that said last week it may default on debt and face bankruptcy, reiterated on Nov. 8 that it's committed to the $4 billion Singapore resort. The company has drawn down at least S$2 billion ($1.3 billion) from a S$5 billion credit facility by several banks for the project.
``If Las Vegas Sands cannot cough up its share of equity, the Singapore government is likely to step in,'' Donald Chua, a Singapore-based analyst at CIMB-GK, wrote in a report today. ``A viable option could be a 49:51 joint venture between the government and CapitaLand, with CapitaLand taking a controlling stake in the project.''
Las Vegas Sands was one of two gaming companies that won the right to build resorts in Singapore after the city-state lifted a four-decade ban on casinos in 2005 to diversify the economy and create jobs. The company said last week it faces ``substantial doubt'' about its ability to survive and may be short of cash for $16 billion of projects in Asia.
Las Vegas Sands said in an e-mailed statement today it declined to comment on its earnings announcement. CapitaLand said in an e-mail it hasn't held any discussions with the Las Vegas- based company, adding that it's seeking investments in the ``continuing global recessionary environment.''
`Carefully Explored'
``Potential opportunities will be carefully explored and evaluated, ensuring that an acquisition is made only at the right time, right price and when target returns are met given the current difficult economic operating environment,'' CapitaLand said in the statement.
The Singapore Tourism Board said in an e-mailed response to Bloomberg queries today it remains ``in dialogue'' with Marina Bay Sands and will ``work closely'' with the company to complete the project. Singapore's Minister Mentor Lee Kuan Yew said Las Vegas Sands's development will go on even as the project comes ``under pressure,'' the Business Times reported today.
CapitaLand, Southeast Asia's largest developer, formed a partnership with MGM Mirage in 2005 to bid for the project that Las Vegas Sands won. It also teamed up with Bahamas-based Kerzner International Ltd. to submit a failed bid for a second gaming resort on Sentosa island. The developer also invested in an entertainment project in Macau last year, giving it a foothold in the world's biggest casino market by gaming revenue.
Holding Cash
Liew Mun Leong, CapitaLand's chief executive officer, said on Oct. 31 the developer's cash position stood at S$4.2 billion, enabling it to seek opportunities for acquisitions. The developer also said that third-quarter profit fell 26 percent as slowing economic growth hurt demand for homes in Singapore, China and Australia.
Participation in the gaming resort, as well as possible provisions for the value of its land holdings amid a slump in prices, will raise CapitaLand's net gearing, or debt-to-equity ratio, to more than the company's target of 0.8 times, CIMB-GK's Chua wrote in the report.
``While it is currently well-capitalized, we believe the sheer size of the Marina integrated resort project could pose substantial funding strains,'' the analyst said.
CapitaLand rose 7 cents, or 2.2 percent, to S$3.24 at the close in Singapore. The stock has dropped 48 percent this year, compared with a 45 percent retreat in the benchmark Straits Times Index.
Still, taking a stake in the Marina Bay gaming resort could boost the company's net asset values and earnings outlook, Chua said in the report. The regulated gambling market in the Asia- Pacific region is expected to expand 15.7 percent a year to $30.3 billion in 2011, PricewaterhouseCoopers LLP has estimated.
``If the funding hurdle can be crossed through different schemes of arrangement, we believe a possible participation in an integrated resort could spell exciting long-term values for the group,'' Chua wrote.
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