skippy44 schreef:
After Hours: 4.98 Down -0.12 (-2.35%)
November 12, 2008
In the Land of Duh!: Moody's Downgrades Las Vegas Sands (LVS)
Las_vegas_sands_logo Moody's had had the corporate debt ratings of Las Vegas Sands Corp.(NYSE: LVS) on review for possible downgrade since mid-July. Just today, the debt ratings agency announced that it has lowered the corporate debt ratings of the casino operator. Furthermore, the ratings were also placed on review for possible further downgrade(s). In mid-July the stock traded as low as the $30's and rallied later in July and August to see $50.00+ again. Shares have been trading at under $5.00 today. When will the timeliness of ratings agencies finally be challenged by oversight or by regulatory agencies?
The Moody's downgrade reflects the casino operator's considerable leverage, the continuation of significant negative trends in Las Vegas, and an expectation that these trends will continue in the foreseeable future. it further considers recent visitation restrictions in Macao which will probably slow its growth at least until the Chinese government decides to relax restrictions there.
The ratings agency did positively note the delay in capital spending, and combined with the recent capital raise program should alleviate concerns related to liquidity and covenant compliance. But the review for possible further downgrade(s) considers that the proposed capital raise has not closed and is in final stages of a $2.1 billion injection. A failure to successfully raise adequate new capital would likely result in a debt covenant default and could jeopardize the company's ability to operate as a going concern. The risk is that the ratings could be further taken down by several notches.
Moody's decided to take a consolidated approach to rating Las Vegas Sands and all of its operating
subsidiaries. Below are the downgrades:
* Corporate family rating to B2 from Ba3
* Probability of default rating to B2 from Ba3
* $250 million 6.375% senior notes to B2 from Ba3
Venetian Casino Resort, LLC (and its co-issuer Las Vegas Sands, LLC) ratings lowered and placed on review for possible downgrade:
* $1 billion revolver expiring 2012 to B2 from Ba3
* $3 billion term loan due 2014 to B2 from Ba3
* $600 million delay draw term loan due 2014 to B2 from Ba3
* $400 million delay draw term loan due 2013 to B2 from Ba3
Venetian Macao Limited ratings lowered and placed on review for possible downgrade:
* $700 million revolver expiring 2011 to B2 from B1
* $1.8 billion term loan due 2013 to B2 from B1
* $100 million term loan due 2011 to B2 from B1
* $700 million delay draw term loan due 2012 to B2 from B1
When you add all this up you can see the mountain of debt that the company already has. But you can also see that this downgrade from moderate junk status down deeper into junk status is also about as timely as a broken watch. Moody's and S&P both operate under "taking the new facts into consideration and how the new developments will affect their credit quality ahead." But when you see this you also wonder how much longer investors will even care what the ratings agencies have to say.