Las Vegas Sands Can’t Restart Dividend Until End of 2022 Per Lender Agreement

Posted on: September 6, 2021, 01:01h. 

Last updated on: September 6, 2021, 01:19h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Las Vegas Sands (NYSE:LVS) won’t restart its dividend until at least late 2022. That’s  unless it meets certain liquidity requirements due to an amended agreement with a group of creditors.

LVS dividend
Sands’ Venetian Macau. The company probably won’t restart its dividend anytime soon, but it can spend capital in its largest market. (Image: Bobby Yip/Reuters)

In exchange for laying off resumption of the payout, the gaming company is getting the green light from a consortium of lenders, led by Bank of Nova Scotia, to sell its Las Vegas assets. Those include the Venetian and Sands Expo & Convention Center.

In March, the casino operator announced the sale of those venues to Apollo Global Management (NYSE:APO) and VICI Properties (NYSE:VICI) for $6.25 billion. A previous accord with the creditors barred Sands from selling its domestic operations, but the covenant is being waived. As a result of that relaxation, LVS must hold off on restarting its payout unless it has liquidity in excess of $1 billion.

Pursuant to the amendment, the existing revolving credit agreement was amended to extend the period during which the borrower is unable to declare or pay any dividend or any other distribution unless liquidity is greater than $1 billion on a pro forma basis after giving effect to such dividend or distribution, to December 31, 2022,” according to a Form 8-K filing with the Securities and Exchange Commission (SEC).

The pact is also revised to extend the period in which LVS isn’t required to maintain a consolidated leverage ratio of 4-to-1 as of the last day of any fiscal quarter through the end of 2022. It also increases the minimum liquidity the operator is required to carry to $700 million.

LVS Dividend History

Sands, the largest US gaming company by market value, halted its payout in April 2020 at the height of the coronavirus pandemic. That happened while its Las Vegas Strip venues were shuttered and came just two months after its five Macau integrated resorts were closed for 15 days.

LVS long had one of the richest payouts in the gaming industry, as well as one of the more enviable track records of payout growth. When the dividend was suspended, it was $3.16 per share annually and yielded 6.88 percent. It was a tough decision for the late Sheldon Adelson, as the former LVS chairman and chief executive officer was known for saying, “Yay, dividends!”

Because of the global health crisis, Sands was far from the only dividend offender in the gaming space. A slew of competitors either cut or suspended payouts. While global dividend growth is soaring this year and flirting with pre-pandemic highs, few casino operators are restarting or boosting distribution.

Based on its 742.82 million shares outstanding and its annual payout of $3.16 a share, Sands saves $2.34 billion every year it doesn’t deliver the old dividend.

In the wake of the Las Vegas asset sale, some analysts speculated that Sands could use some of that cash to restart the payout in modest fashion. But the new lender agreement could diminish the odds of that happening.

Uses for Venetian Sale Cash

It’s a foregone conclusion that some of the proceeds from the sale of the aforementioned Las Vegas assets will be used by Sands to enhance its Macau properties, including ramping-up the Londoner.

The company also said some of the capital could be directed to Marina Bay Sands (MBS) in Singapore.

When the Las Vegas transaction was announced in March, LVS mentioned returning capital to shareholders. While the new lender agreement put some restraints on a dividend, it doesn’t mention barring the gaming company from repurchasing stock.