Govt 'May Take Stake In Marina IR'

Source : The Straits Times, Nov 11, 2008

Venture with CapLand if Las Vegas Sands goes bankrupt: Report

THE Singapore Government may form a venture with CapitaLand to take over one of the country's two integrated resorts if Las Vegas Sands fails to stave off loan defaults, CIMB-GK Research said yesterday.

Las Vegas Sands, the gaming concern that said last week it may default on debt and face bankruptcy, has reiterated its commitment to the US$4 billion (S$6 billion) Singapore venture.

The company has drawn down at least $2 billion from a $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,' Mr Donald Chua, a Singapore-based analyst at CIMB-GK, wrote in a report.

'A viable option could be a 49:51 joint venture between the Government and CapitaLand, with CapitaLand taking a controlling stake.'

Las Vegas Sands was one of two gaming companies that won the right to build casinos in Singapore after the city state lifted a four-decade ban on them 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 US$16 billion of projects in Asia.

In an e-mail statement yesterday, it declined to comment on its earnings announcement.

CapitaLand said in an e-mail that it has not held any discussions with the Las Vegas-based company, adding that it is seeking investments in the 'continuing global recessionary environment'.

'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.

The Singapore Tourism Board said in an e-mail response to Bloomberg queries yesterday that it remains 'in dialogue' with Marina Bay Sands and will 'work closely' with the company to complete the project.

Minister Mentor Lee Kuan Yew has said Las Vegas Sands' development will go on, even though it is 'under pressure' as the company had taken on big debts while expanding to places like Macau.

As Beijing has restricted the number of Chinese travellers who are allowed to go to Macau, this has caused Las Vegas Sands' share price to decline, MM Lee said.

'But in Singapore, that project will go on because we are not depending on China and Chinese workers coming in from the rest of China to visit our integrated resorts.'

CapitaLand 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 to submit a failed bid for a second integrated 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.

Mr Liew Mun Leong, CapitaLand's chief executive officer, said last month the developer's cash position stood at $4.2 billion, enabling it to seek opportunities for acquisitions.

Participation in the integrated 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 Mr Chua wrote in his report.

'While it is currently well-capitalised, we believe the sheer size of the Marina integrated resort project could pose substantial funding strains.'

CapitaLand shares yesterday rose seven cents, or 2.2 per cent, to $3.24. It has dropped 48 per cent this year, against a 45 per cent retreat in the benchmark Straits Times Index.

Still, taking a stake in the Marina Bay integrated resort could boost the company's net asset values and earnings outlook, Mr Chua wrote.

'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,' he added.