Casino Debt Comes Due
A rash of stories lately have been profiling the ways gaming industry Goliaths are trying to relieve some of their debt burden, most notably Las Vegas Sands Corp. and MGM Mirage.
Out of the two, MGM Mirage seems to be in the most trouble. With no financial reports since September and more than $13 billion in debt, shareholders should be getting a little anxious. Although there was a $775 million sale of Treasure Island to billionaire Phil Ruffin late last year, there have been few other moneymaking initiatives. The company has been talking about getting waivers for debt relief and some industry analysts are betting on a Chap. 11 announcement soon. (And it still needs more than $1 billion to finance its CityCenter project.) It has all but said it’s in default unless someone waves a magic wand and makes the industry profitable.
Las Vegas Sands, whose chief executive Sheldon Adelson and his wife sank $475 million into the company, is hoping cutting costs by $250 million and revenue from its Marina Bay Sands project in SIngapore will help their debt situation. (The Sands project in Macao didn’t fare so well.) They also plan to sell two retail malls in Macao. It’s all an attempt to delay defaulting on the company’s debt.
Added to all this is the Riviera Holdings Corp. in “technical default” from Wachovia Bank (now a division of Wells Fargo) and Harrah’s Entertainment debt-exchange offer to bondholders. Now there’s talk that most of Las Vegas will be owned by banks.
While the idea of businesses or resorts being foreclosed on or shut down by banks isn’t new, it’s becoming less unique. Money was cheap a few years ago and banks were eager to lend, but that freely lent money led to the financial downfall of many of those same banks. They were shut down or taken over by financial giants with Scrooge-like tendencies and a distaste for any risk, closing credit markets to almost everyone. Now those people and companies that are the most heavily leveraged are the most vulnerable.
There is no quick-fix scheme here. This Las Vegas drama will continue to play out, perhaps with a few less players.
Bay Area resident and award-winning business journalist Barbara E. Hernandez has covered tourism, real estate and personal finance. Her clients include the New York Times, Los Angeles Times, San Francisco Chronicle and Washington Post.
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