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2024-04-23
Coming refinancing of US$1.8 billion in debt due in August 2025 that had been issued by Macau casino operator Sands China Ltd, is likely to coincide with “some level of debt paydown at Sands China,” said a Monday note from CBRE Capital Advisors Inc.
Sands China’s parent firm, Las Vegas Sands Corp (LVS), also has US$1.75-billion in debt maturing in August this year, which the group “intends to refinance ‘in short order’,” noted CBRE, citing management comment.
The institution also observed that there would be refinancing of US$500 million in Las Vegas Sands debt due in June 2025.
CBRE’s analysts Colin Mansfield and Connor Parks added: “We expect the company’s issuance to be well-received by the capital markets given their high quality assets, enviable geographic diversification, and investment grade ratings.”
S&P Global Ratings has Las Vegas Sands debt at ‘BBB-/Stable’; Moody’s Investors Service Inc rates it ‘Baa3/Stable’; and Fitch Ratings Inc has it at ‘BBB-/Stable’, observed CBRE in its update.
It stated: “Both Las Vegas Sands and Sands China bonds have outperformed the broader ‘BBB’ index year-to-date.”
Analysts Mr Mansfield and Mr Parks observed, referring to Las Vegas Sands and its recent first-quarter earnings call: “Management reiterated its commitment to investment grade and long-held financial policy of maintaining gross leverage of ‘2.0 times to 3.0 times’.”
“We expect leverage to continue to decline thanks primarily to EBITDA [earnings before interest, taxation, depreciation and amortisation] growth, with some level of debt paydown when the Sands China Ltd’s ’25s [2025 notes] are refinanced.”
As well as operating a collection of casino resorts in Macau (pictured, Venetian Macao), the U.S. parent also controls the Marina Bay Sands gaming resort in Singapore.
Marina Bay Sands saw first-quarter adjusted property EBITDA at US$597 million, up 9.7 percent sequentially, and a 51.5-percent improvement from a year earlier, though Sands China saw a 6.7-percent sequential fall in quarterly EBITDA, amid low hold.
CBRE said of the casino group’s overall first-quarter situation: “Gross leverage improved thanks to EBITDA growth.” The analysts added: “On a consolidated basis, gross leverage improved to 3.3 times from 3.6 times quarter-on-quarter.
“Standalone leverage in Macau and Singapore also improved sequentially to 3.6 times and 1.5 times, respectively, net of royalty fees paid to parent Las Vegas Sands and inclusive of the US$1.06-billion subordinated loan at Sands China,” stated CBRE.
The group as a whole “can achieve its target leverage level through EBITDA growth alone, but they conservatively would like to reduce absolute debt levels at Sands China given debt raised during the pandemic,” said CBRE.
The institution said the group was budgeting for just under US$4.33 billion in cumulative capital expenditure through to year-end 2027, which CBRE thinks can be funded through operating cash flow, excluding spending on expansion of Marina Bay Sands.
Work on revamping Tower 3 at the property is due to be concluded by the secpnd quarter of 2025. But the actual expansion of Marina Bay Sands – a pledge made by the group to the Singapore government – will only be completed in July 2029, the group said earlier this month.
CBRE stated in its Monday assessment: “Some disruption is expected along the way, particularly in Macau this year with the [Londoner Macao] Sheraton [hotel] tower/casino floor and [Venetian Macao] Cotai Arena renovations.” The latter is due to reopen in November.
“However, the short-term pain is worth the long-term benefits of asset reinvestment and Singapore’s current performance is testament to that,” said CBRE.
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