An update on Singapore's casino projects: ST Nov 8, 2008Yes, I think so too. The government has pinned so many of its hopes on the IR projects that it surely wouldn't allow the projects to fail. But it sure would be interesting if we knew what was being discussed behind closed doors. My guess is that in the ultimate worst-case scenario, Temasek Holdings would appear as the gallant white knight, perform its national service and pump in money to save the struggling project.
Sands gives reassurance
By Lim Wei Chean
THE top suit behind troubled casino operator Las Vegas Sands met the Singapore authorities this week, and yesterday gave a fresh commitment to completing the Marina Bay integrated resort (IR).
Mr Sheldon Adelson, chairman and chief executive officer of Las Vegas Sands, said: 'In the light of recent turmoil in the global markets, I felt the need to personally reaffirm our commitment to the success of Marina Bay Sands. I am pleased to say that the Singapore Government's support of our project remains strong.'
The statement from Las Vegas Sands did not specify whom Mr Adelson had met.
But the consensus among analysts is that if the project were in trouble, the Government would intervene ....
Even if the Sands project does go ahead successfully and completes on time, one major difficulty is that the tourism and gaming industries are "good times" industries. In bad times, people save their money for the essentials. Holidays and casinos are not essentials.
Which means that if the world heads into a really bad economic patch in the next few years, the IR projects can do little to help Singapore. Few tourists would come and even fewer tourists would gamble.
Sands' reassurances over the future of the Marina IR follows fresh doubts raised by its auditors about the company's ability to continue operating.And that is scary. Especially because of the extent to which the company has borrowed from our three local banks (see below). They would be very badly hit, if the project were to fail.
In a regulatory filing on Thursday to the United States Securities and Exchange Commission, PricewaterhouseCoopers said the casino operator, which has US$8.8 billion (S$13 billion) in long-term debt at the end of June, would not be able to meet lenders' requirements unless it cuts spending on developments, boosts earnings at its casinos on the Las Vegas strip and raises more capital.
It was also said to be relooking projects under way in Las Vegas, Pennsylvania, Macau and Singapore.
Las Vegas gaming analyst Bill Eadington said the company has lost over 90 per cent of its stock value in 13 months. Flying that close to bottom, the very existence of the company is in question, not just one of its developments, he added.
The Singapore authorities have so far declined to say more. When contacted, the Singapore Tourism Board would only refer to its earlier comment that it was 'in talks' to 'facilitate the success' of the development.In this context, "ring-fencing" probably means what it usually means, in the context of project finance. That is, the financing is structured such that the lenders are to get repaid out of the cash flows generated by the project (when it's up and running). The cash flows go nowhere else, until the lenders are repaid, and the lenders can look nowhere else except to those cash flows, to get their money back.
Singapore's banks, OCBC, UOB and DBS, which have significant exposure as lead arrangers for the project, remained optimistic.
About half of the $5.4 billion credit facility for Marina Bay Sands has already been drawn upon, according to UOB Kay Hian's latest report.
OCBC chief executive officer David Conner said the loan is 'ring-fenced' with no exposure to the company's projects in Las Vegas or Macau.
This means, of course, that it is essential for the project to succeed in getting up and running. If the project stalls halfway, then the banks would lose big money.