An offer Singapore couldn’t refuse?

November 25, 2008 by admin
Filed under: Financial Matters 

By the Singapore Democrats, 24 Nov 2008

Original Blog link

Las Vegas Sands Chairman and Chief Executive Sheldon Adelson raised $2.1 billion last week, a remarkable feat for a company that was on the brink of bankruptcy.

Add the fact that the deal was done in such a short time – companies with smaller problems and less baggage would have found raising such an amount of cash over a couple of days almost impossible – one has to wonder whether something else was at work other than the straightforward selling of stocks and warrants by Mr Adelson.

To get a better idea of what went on behind the scenes, it may be helpful to go back a few weeks and retrace the development of the LVS saga.

November 6, 2008. Reports that Sands’ stocks had tumbled precipitously from a high of US$123 to $7 rocked the gaming industry. The company announced that it was in dire need of fresh capital without which it expected “to miss certain borrower obligations.” In simple English, it would go bankrupt.

And a bankrupt LVS “would need to immediately suspend portions, if not all, of our ongoing global development projects and consider other alternatives.”

The strategy worked. Alarm bells went off in Singapore and Government officials were at the table with LVS faster than one could say “Bankrupt!”

Mr Adelson didn’t get to where he is by playing pat-a-cake with his funders. His message: If Las Vegas Sands goes down, Marina Sands goes down with it. The Singapore officials got it. Given the desperate need for the project to be completed – the gaping hole of half erected structures downtown would be a daily reminder of the PAP’s failure – was Singapore made an offer it couldn’t refuse?

Two days after the news of Sands’ imminent bankruptcy broke, LVS and Singapore officials “pledge to complete the Singapore project.”

At about that time, Minister Mentor appeared and blessed the Marina project saying that the development will go on even as it is “under pressure.”

DBS’s CEO Richard Stanley, one of the Singapore banks which had loaned heavily to the construction of Marina Sands, even declared that “There’s been no default, no indication of default” by LVS.

Two days later, Mr Adelson averred that completing Marina Bay Sands remained the “number one priority for our company.”

The turnaround by the Sands’ boss was abrupt as it was eye-opening. Just a few weeks earlier the mogul had said that he intended to raise the money “to finish work on some Macau expansion projects.”

And why not? Two-thirds of LVS’ revenue comes from its Macau operations which have even overtaken Las Vegas as the world’s biggest gambling centre. But Mr Adelson announced on 10 Nov 08 after the meeting with Singapore officials that he was halting construction in Macau.

The Senior Minister of State for Trade and Industry S Iswaran, however, insisted that no bailout money from the Government was given to Mr Adelson because “this has always been a commercial project.”

But where, under the current financial climate, did Mr Adelson go to get $2 billion? Interbank lending is practically at a stand still, money markets is nearly non existent, corporate loans are frozen, and banks themselves are on the brink of collapse.

Mr Iswaran tried to explain: “The fundraising that Marina Bay Sands has done is an example of what they need to do in this environment in order to strengthen their balance sheet and be able to fund the relevant projects and they have to do some prioritization and that is what they have been doing and I think it is the right thing.”

Does anyone know what in the world he is saying? The mumbo-jumbo comes straight from the PAP playbook: If you can’t convince, confuse. It only makes one more curious how Mr Adelson managed to raise $2 billion in the span of a couple of days.

Considering the state of the global economy and the current financial crisis such an amount is a lot of money to bet on a sick failing company.

The US is in a recession which is projected to get worse. Europe and Japan is headed in the same direction. Millions of jobs have been lost all over the world with more to come. The leisure industry is expected to take a tumble, airlines are bracing for hard times and so are hotels.

In the US revenue from gaming centres are under pressure, slipping 6 percent so far this year due in large part to the on-going crisis. Boyed Gaming Corp has stopped work on its new resort and suspended giving out dividends.

MGM Mirage has defaulted on loans and was down graded by Fitch Ratings in October. It had to renegotiate its $7 billion debt with its lenders. Another US gambling giant Ameristar Casino Inc is in dire straits too.

In Macau gambling revenue is expected to drop to about $876 million a month next year from $1 billion a month this year.

And the Singapore Government is betting that the gaming industry at Marina Bay will take off?

Maybe the PAP leaders know something that we don’t. But considering how things have collapsed at Micropolis, Suzhou, Shin Corp, Merill Lynch, UBS, Citigroup, Biopolis, and ABC Learning, it may be better hold on to your wallet than your breath.

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One Comment on An offer Singapore couldn’t refuse?

  1. The Singapore Daily » Blog Archive » Weekly Roundup: Week 48 on Sat, 29th Nov 2008 11:50 am

    2. [...] – Everyday’s Life in a Snapshot: golden period golden period golden period – Sgpolitics.net: An offer Singapore couldn’t refuse? – Blowin’ In The Wind: Singapore worried about money flowing overseas – TheSuffocate: Uncle [...]

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