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 |