Friday, November 07, 2008

Treacherous Sands For Adelson -

It is rare to find a better example of ratios and bond covenants than in this piece from Forbes.

Treacherous Sands For Adelson -
"Las Vegas Sands said in a regulatory filing that it doesn't expect to comply with its maximum leverage ratio covenant in the fourth quarter. That would trigger defaults that might force it to suspend multibillion-dollar development projects in the U.S. and Asia and 'raise a substantial doubt about the company's ability to continue as a going concern,' it said.

The question that needs to be answered is how much of that capital Adelson himself is willing and able to provide. Adelson, whose personal wealth is largely tied to his stake in Sands, has taken a painful haircut as his company's stock price has dropped 93.0% over the past year. .....if it defaults on its loans, lenders would be able to exercise their rights under the agreements, including bringing financing maturity dates forward."
and later in the article another great teaching point that casino and travel spending is from disposable income and hence more volatile:
"...the casino business has been struggling as consumers continue to curb spending due to the U.S. housing downturn, diminishing credit, rising food costs and recession worries. Sagging U.S. consumer confidence and spending power has hurt business in Las Vegas, "

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