Las Vegas Sands Could Delight Investors with Debt Refinancing

Refinancing certain looming debt maturities could help Las Vegas Sands (NYSE: LVS) win over investors, say sell-side analysts.

Analysts Colin Mansfield and Connor Parks of CBRE Capital Advisors mentioned in a recent report to clients that the gambling company had $1.75 billion that is due in August and may be refinanced. They also mentioned Sands's propensity to refinance $500 million in corporate notes that have a June 2025 maturity. The largest operating subsidiary of the parent company, Sands China, has $1.8 billion in commercial paper that matures in August 2025. The refinancing of this obligation is probably going to happen at the same time as the issuer reduces its debt.

"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.

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

Refinancing Is Probably Good for Sands

While many of its competitors have junk credit ratings, LVS has low investment-grade ratings, suggesting that credit investors are at least somewhat aware of the operator's impressive portfolio of gaming properties in the Asia-Pacific area.

Earlier this month, Sands successfully obtained a new $1.5 billion revolving credit arrangement, confirming that much. Refinancing isn't the same as debt elimination, but since 13% of LVS's debt is due this year and the remaining 49% is due in 2025 and 2026, creditors are probably fine with the operator delaying maturities. 

At a time when investors are displaying a resurgence of interest in commercial paper issued by Macau concessionaires—of which Sands China is the largest—the company's decision to release itself from the burden of impending bond maturities is particularly significant. That faith has been repaid by LVS and its China branch.

Mansfield and Parks continued, "Year to date, both Las Vegas Sands and Sands China bonds have outperformed the broader 'BBB' index."

Sands Utilize Enhanced

Sands' gross leverage increased to 3.3x from 3.6x on a sequential basis, driven by strong earnings before interest, taxes, depreciation, and amortization (EBITDA) growth at its Macau venues in the first quarter and continued strength at Marina Bay Sands in Singapore.

The long-term goal of LVS management is to keep investment-grade credit ratings while increasing leverage to a range of two to three times. During the coronavirus pandemic, the operator and its rivals in Macau took on a large amount of debt, suggesting that the operator will probably place a high priority on decreasing liabilities at Sands China.

Sands is expected to invest $4.3 billion by the end of 2027, according to CBRE analysts, minus the $3.3 billion that is scheduled for a fourth tower at Marina Bay Sands. But generating cash flow can cover a big portion of that $4.3 billion.