Thursday, August 19, 2010

Barclays update on LVS

Las Vegas Sands' credit facility amend and extend should enhance LVS' already solid balance sheet. LVS was able to reduce $1 billion in debt, extend $2.9 billion of its debt an additional 2 years at attractive interest rates (an increase of 100 bp over LIBOR) and relax its leverage covenants. The transaction gives LVS additional flexibility in the US, which is important as the covenants in the US were the most constraining on its cash balances. Given today's announcement plus continued strong newsflow regarding gaming growth in Singapore, we are raising our price target to $32 from $30.

Today, Las Vegas Sands announced an amendment and extension of the company's US-based credit facility. The transaction extends 75% of LVS' $3.9 billion credit facility to maturities of 2015 and 2016 at L+275. LVS agreed to pay down $1 billion of the $3 billion in extended term loans, resulting in $1.9 billion in extended term loans outstanding. The $980 million in term loans not extended will continue to mature in 2013 and 2014 and bear interest at L+175.

In addition, $530 million of the revolving credit facility was extended to 2014 at L+250. As part of the agreement, the total revolver commitment was also reduced to $750 million from $1 billion ($220 million in commitments will continue to expire in 2012). LVS currently has no borrowings under its revolving credit facility.

The leverage covenants on the facility were also increased. From 3Q10 to 2Q11, the debt/EBITDA leverage covenant goes to 6.5x (versus prior 5.5x in 3Q10 and 4Q10 and 5.0x from 1Q11 to expiration). We estimate leverage of 4.9x and 4.6x in 3Q10 and 4Q10. In 3Q11 and 4Q11, the covenant is 6.0x, in 1Q12 and 2Q12, the covenant is 5.5x and from 3Q12 on, the covenant is 5.0x vs our ests of 4.1x and 3.3x in 2011 and 2012.

Our 2011E EPS goes to $0.87 from $0.85 on lower interest expense.

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