http://www.reuters.com/article/2012/04/05/...erGoodsSector&rpc=43
Rating-Aktion
Am 5. April 2012, hob Standard & Poors Ratings Services Corporate Kredit-Rating auf der Las Vegas Sands Corp (LVSC) Familie von Unternehmen zu "BB +"
von 'BB'. Abgesehen von Las Vegas Sands Corp, die LVSC Familie der Nenn Unternehmen beinhaltet Las Vegas Sands LLC, deren venezianische Casino Resort LLC
Tochterunternehmen und Affiliate-VML US Finance LLC (VML). Gleichzeitig wir entfernt alle Bewertungen über das Unternehmen aus CreditWatch, wo sie in Verkehr gebracht wurden mit positiven Auswirkungen auf 7. Februar 2012. Der Rating-Ausblick ist positiv.
TEXT-S&P raises Las Vegas Sands ratings
Thu Apr 5, 2012 11:40am EDT
Overview
-- We believe gaming operator Las Vegas Sands Corp.'s financial
profile has improved to the point that it supports a higher rating, even
incorporating aggressive development spending over time.
-- We are raising our corporate credit rating on Las Vegas Sands to 'BB+'
from 'BB'.
-- We are also revising our recovery rating on the company's U.S. senior
secured credit facilities to '2' from '3' and raising our issue-level rating
to 'BBB-' from 'BB', reflecting the recent redemption of its senior notes.
-- The positive rating outlook reflects our view that further rating
upside is possible based on our current performance expectations, particularly
in the event of a strong ramp-up of Sands Cotai Central.
Rating Action
On April 5, 2012, Standard & Poor's Ratings Services raised its corporate
credit rating on the Las Vegas Sands Corp. (LVSC) family of companies to 'BB+'
from 'BB'. Aside from Las Vegas Sands Corp., the LVSC family of rated
companies includes Las Vegas Sands LLC, its Venetian Casino Resort LLC
subsidiary, and affiliate VML U.S. Finance LLC (VML). At the same time, we
removed all ratings on the company from CreditWatch, where they were placed
with positive implications on Feb. 7, 2012. The rating outlook is positive.
In addition, we revised our recovery rating on LVSC's U.S. senior secured
credit facilities to '2' from '3'. The '2' recovery rating indicates our
expectation for substantial (70% to 90%) recovery for lenders in the event of
a payment default. Our revised recovery rating follows the recent redemption
of the company's 6.375% senior notes, which shared in the security package
pari passu with obligations under the credit facilities. With the lower amount
of secured debt outstanding, this results in improved recovery prospects for
the U.S. credit facilities under our simulated default scenario.
We also raised our issue-level rating on VML's $3.7 billion senior secured
credit facility to 'BB+' from 'BB', reflecting the one-notch rise in our
corporate credit rating.
Rationale
The upgrade reflects our belief that, under our updated intermediate-term
performance expectations, LVSC will maintain credit measures comfortably
within our threshold for a 'BB+' corporate credit rating, even incorporating
aggressive development spending over time. Given our assessment of LVSC's
business risk profile, we would be comfortable with leverage temporarily
spiking as high as 4.5x to fund development projects, but generally consider
leverage closer to 4.0x to be in line with a 'BB+' corporate credit rating. As
of Dec. 31, 2011, our measure of LVSC's leverage was 3x, which provided a 1x
cushion relative to this threshold, while unrestricted cash balances were
nearly $4 billion. While additional development opportunities, whether in the
U.S. or abroad, will likely take at least a few years to come to fruition, we
expect that LVSC will aggressively pursue them and potentially seek multiple
opportunities at once. Therefore, we view a leverage cushion and large cash
balances as necessary to preserve flexibility in the event opportunities arise
and/or to protect against unexpected performance volatility.
The positive rating outlook reflects our view that further rating upside is
possible, based on our current performance expectations. For Las Vegas Sands
to achieve a higher rating (and investment-grade status), we would be
comfortable with leverage temporarily spiking to the high-3x area to fund
development projects, but generally consider leverage closer to 3x in line
with a 'BBB-' corporate credit rating. In the event of a strong ramp-up of
Sands Cotai Central over the next several quarters, we believe an upgrade to
'BBB-' is possible, as we would expect leverage to improve to below 2.5x by
early 2013. An investment-grade rating on Las Vegas Sands, however, would also
require management to publicly articulate a financial policy around its
tolerance for leverage that is aligned with our leverage threshold.
Our 'BB+' corporate credit rating on LVSC reflects our assessment of the
company's business risk profile as "satisfactory" and its financial risk
profile as "significant."
Our assessment of LVSC's business risk profile as satisfactory reflects the
company's leading presence in the three largest global gaming markets,
high-quality assets and well-known brands, and an experienced management team.
These business strengths are somewhat offset by the gaming industry's
vulnerability to economic cycles given its discretionary nature, the high
levels of competition in the Las Vegas and Macau gaming markets, and
management's aggressive expansion strategy.
Our assessment of LVSC's financial risk profile as significant takes into
account the company's large debt burden and track record of adding substantial
leverage to fund development opportunities. Still, notwithstanding these
factors, we expect LVSC's strong liquidity position to allow it to pursue and
finance developments in a manner that preserves credit quality in line with
the current rating. In addition, the company is currently pursuing a
refinancing at its Singapore subsidiary, which will extend debt maturities,
substantially reduce its interest burden, eliminate amortization payments over
the next few years, and increase flexibility to pay cash distributions.
Additional risk factors we are monitoring are related to LVSC being subject to
multiple lawsuits and investigations, including the following:
-- An action filed by the former CEO of Sands China alleging the
company's breach of his employment contract and tortious discharge; and
-- An investigation by the SEC and the Department of Justice relating to
compliance with the Foreign Corrupt Practices Act.
While the timeframe within which these issues will be resolved is unclear, as
is the extent to which any potential judgment against LVSC would impact credit
quality, these issues may weigh on ratings upside until we have further
clarity around potential judgments or they are resolved.
When assessing LVSC's credit quality, we consider the consolidated entity,
despite the distinct financing structures at parent company LVSC and its U.S.,
Macau, and Singapore subsidiaries. We deem the strategic relationship between
the parent and each subsidiary as an important factor that has a bearing on
the credit quality of the overall consolidated entity. However, in notching
our issue-level ratings from the corporate credit rating, we recognize the
distinct financing structures and associated collateral.
Our rating incorporates the following specific performance expectations:
-- For LVSC's Las Vegas properties, we are assuming net revenue growth in
the mid-single-digit percentage area in 2012 and 2013. We are also
incorporating an expectation that property EBITDA margin gradually improves to
about 26% in 2013 from 25.2% in 2011. This scenario would result in property
EBITDA growth averaging about 8% per year over this timeframe. This outlook
incorporates our economists' current forecast that growth in U.S. real GDP and
consumer spending will both average about 2% over the next two years. We
believe the Las Vegas Strip should realize at least modest growth in gaming
revenues over this timeframe as the economy continues to gradually improve.
Additionally, Las Vegas visitation trends remain solid, which, combined with
ongoing improvement in group booking levels, should support continued strong
occupancy at LVSC's properties in at least the high-80% area and continued
improved average daily rates during this period.
-- For the Sands Bethlehem property, we are assuming growth in net
revenues and property EBITDA in the high-single digits in 2012, reflecting
continuing benefits from the addition of table games and the recent opening of
the hotel. In 2013, we are assuming more modest growth in both net revenues
and property EBITDA, resulting in EBITDA reaching about $100 million by the
end of 2013.
-- For LVSC's three existing Macau properties, we are assuming a net
revenue decline of 2.5% in 2012, reflecting competitive pressure from Sands
Cotai Central, followed by modest growth in 2013. We are also incorporating an
expectation that property EBITDA margin weakens by approximately 200 basis
points (bps) in 2012 and rebounds slightly 2013, which would result in a
slight decline in EBITDA over the next two years. While growth in Macau has
greatly exceeded our expectations in recent years and we expect the market to
grow in the 10% to 15% range this year, we believe the recently opened Galaxy
resort in Cotai, in addition to Sands Cotai Central, will account for much of
the growth in the Macau gaming market over the next few years. Still, based on
our economists' current forecast that growth in real GDP in the People's
Republic of China will remain in the high-single-digit percentage area over
the next few years, we believe LVSC's existing three properties will benefit
from at least modest revenue growth after 2012 despite substantial new
capacity entering the market. Tourists from China, along with those from Hong
Kong, consistently comprise over 80% of visitation to Macau.
-- For LVSC's Sands Cotai Central development, the rating incorporates a
gradual ramp-up of cash flow as the properties begin their phased opening this
month. Specifically, we have factored property EBITDA of about $250 million
and $440 million in 2012 and 2013, respectively, into our rating.
-- For the Marina Bay Sands property in Singapore, we are incorporating
an expectation for net revenue growth averaging about 5% per year in 2012 and
2013. We are also incorporating an expectation that property EBITDA margin
stabilizes at about 52%, consistent with performance during 2011, which would
result in EBITDA approaching $1.7 billion in 2013. This growth trend is
relatively in line with our economists' current base case forecast for GDP
growth of 5% in Singapore, and also incorporates our view that current hotel
capacity could somewhat constrain growth in 2012 and 2013 (occupancy levels
exceeded 90% in 2011).
Based on these performance expectations, we expect consolidated net revenues
and EBITDA to grow approximately 10% in 2012 and 2013. This would result in
consolidate leverage improving to below 2.5x by the end of 2013 and cash
balances in excess of $4 billion.
Liquidity
Based on the company's likely sources and uses of cash over the next 12 to 18
months and incorporating our performance expectations, LVSC has a "strong"
liquidity profile, according to our criteria. Relevant factors in our
assessment of LVSC's liquidity profile include the following:
-- We expect the company's sources of liquidity over this period to
exceed its uses by 1.5x or more and believe that sources would exceed uses,
even if forecasted EBITDA were to decline by 30%.
-- We believe that LVSC has sufficient covenant headroom under the
proposed new Singapore credit facilities and its existing VML credit
facilities, such that a 30% decline in forecasted EBITDA would not result in a
breach of financial covenants.
-- Covenant cushion relative to the consolidated leverage ratio under the
U.S. credit facilities will tighten over the next several quarters as the
covenant level gradually steps down to 5x by the third quarter of 2012 from 6x
as of Dec. 31, 2011. Still, we are comfortable that LVSC's meaningful excess
cash balances and ability to pay dividends from the Macau and Singapore
subsidiaries (which would be recognized as EBITDA under the U.S. credit
agreement) provide the flexibility to ensure covenant compliance.
LVSC derives liquidity from excess cash balances, in addition to revolver
availability and cash generated at its U.S., Macau, and Singapore
subsidiaries. As of Dec. 31, 2011, LVSC had approximately $520 million of
borrowing capacity under the U.S. revolving credit facilities and full
availability under its $500 million Macau revolving credit facility. The
proposed Singapore credit facilities include a Singapore dollar (SGD) 500
million revolver, which will have about SGD 385 million drawn at closing. We
also expect LVSC to benefit from enhanced flexibility to upstream cash
generated in Singapore under the proposed new credit facilities, similar to
its VML facilities. LVSC's ability to move cash from the U.S. entity is
somewhat restricted.
During 2011, LVSC generated approximately $2.6 billion in operating cash flow,
which funded about $1.5 billion of capital expenditures, $75 million of
dividends paid to preferred stockholders, and the redemption of the preferred
shares in November 2011. We have assumed aggregate capital expenditures across
the portfolio will approach $3 billion in 2012 and 2013 as the company
completes development of its phased Sands Cotai Central development. This
assumption incorporates some cost overruns with the project. Under our
operating assumptions, expected liquidity is sufficient to fund currently
planned development activity and support covenant compliance without requiring
any further borrowings.
Aside from modest amortization payments scheduled under the U.S. credit
facilities, pro forma for the proposed new Singapore credit facilities, debt
maturities in 2012 and 2013 are minimal. Other uses of cash include a dividend
to common shareholders, as the company recently declared a $1.00 per share
(approximately $823 million) annual dividend.
Outlook
The positive rating outlook reflects our view that a higher rating is possible
over the next several quarters, based on our current performance expectations.
To raise the rating further (into investment-grade status), we would be
comfortable with leverage temporarily spiking to the high-3x area to fund
development projects, but generally consider leverage closer to 3x to be in
line with a 'BBB-' corporate credit rating. In the event of a strong ramp-up
of Sands Cotai Central, we believe an upgrade to 'BBB-' is possible, as we
would expect leverage to improve to below 2.5x by early 2013. An
investment-grade rating on Las Vegas Sands, however, would also require
management to publicly articulate a financial policy around its tolerance for
leverage that is aligned with our leverage threshold at a 'BBB-' rating. In
addition, while the timeframe within which the aforementioned lawsuits and
investigations will be resolved is unclear, as is the extent to which any
potential judgment against LVSC would impact credit quality, these issues may
weigh on ratings upside until we have further clarity around potential
judgments or they are resolved.
A revision of the rating outlook to stable or a downgrade could result from
performance meaningfully below our expectations, or from the company taking a
more aggressive posture toward additional development opportunities, resulting
in a sustained spike in leverage to above 4x.
Related Criteria And Research
-- Methodology And Assumptions: Liquidity Descriptors For Global
Corporate Issuers, Sept. 28, 2011
-- Criteria Guidelines For Recovery Ratings, Aug. 10, 2009
-- Business Risk/Financial Risk Matrix Expanded, May 27, 2009
-- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008
Ratings List
Upgraded And Removed From CreditWatch
To From
Las Vegas Sands Corp.
Las Vegas Sands LLC
Venetian Casino Resort LLC
Corporate Credit Rating BB+/Positive BB/Watch Pos
VML U.S. Finance LLC
Corporate Credit Rating BB+/Positive BB/Watch Pos
Senior Secured BB+ BB/Watch Pos
Upgraded And Removed From CreditWatch; Recovery Rating Revised
To From
Las Vegas Sands LLC
Senior Secured BBB- BB/Watch Pos
Recovery Rating 2 3
Ratings Withdrawn
To From
Las Vegas Sands Corp.
Senior Secured NR BB/Watch Pos
Recovery Rating NR 3 |
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