Las Vegas Sands Could Delight Investors with Debt Refinancing

Posted on: April 23, 2024, 11:22h. 

Last updated on: April 23, 2024, 11:47h.

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

Las Vegas Sands (NYSE: LVS) could earn praise from investors by refinancing some upcoming debt maturities, according to sell-side analysts.

Las Vegas Sands
Sands China’s Parisian Macau. The operator and parent Las Vegas Sands are likely to push out 2024 and 2025 debt maturities, says CBRE. (Image: YouTube)

In a recent report to clients, CBRE Capital Advisors analysts Colin Mansfield and Connor Parks noted the gaming company has $1.75 billion coming due in August, which could be refinanced. They added that Sands is also likely to refinance $500 million in corporate bonds maturing in June 2025. Sands China, which is the parent company’s largest operating unit, has $1.8 billion worth of commercial paper coming due in August 2025 and refinancing of that obligation is likely to coincide with some debt reduction by the issuer.

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,” observed Mansfield and Parks.

At the end of the first quarter, Las Vegas Sands had outstanding liabilities of $13.94 billion compared to $4.96 billion in unrestricted cash.

Refinancing Likely to Benefit Sands

LVS has low investment-grade ratings while many of its peers sport junk credit grades, indicating credit investors have some regard for the operator’s enviable portfolio of gaming assets in the Asia-Pacific region.

That much was confirmed earlier this month when Sands easily procured a new $1.5 billion revolving credit facility. While refinancing isn’t the same as eliminating debt, LVS creditors are likely comfortable with the operator pushing out maturities because 13% of its debt is scheduled to come due this year before another 49% matures in 2025 and 2026.

Sands’ removing the burden imminent of bond maturities is also important at a time when investors are showing renewed appetite for commercial paper issued by Macau concessionaires, of which Sands China is the largest. LVS and its China arm have rewarded that faith.

“Both Las Vegas Sands and Sands China bonds have outperformed the broader ‘BBB’ index year-to-date,” added Mansfield and Parks.

Sands Leverage Improving

Buoyed by solid earnings before interest, taxes, depreciation, and amortization (EBITDA) growth at its Macau venues in the first quarter and ongoing strength at Marina Bay Sands in Singapore, Sands’ gross leverage improved to 3.3x from 3.6x on a sequential basis.

LVS management has a long-term commitment to drive leverage to the 2x to 3x range while maintaining investment-grade credit ratings. The operator and Macau rivals took on significant debt during the coronavirus pandemic, indicating that reducing liabilities at Sands China is likely to be a high priority for the operator.

The CBRE analysts noted Sands is likely to spend $4.3 billion through the end of 2027, excluding $3.3 billion in planned expenditures for a fourth tower at Marina Bay Sands. However, that $4.3 billion can be funded largely from operating cash flow.