Monday, November 17, 2008

Marina Bay Sands a good fit for Tote Board

Marina Bay Sands a good fit for Tote Board
By Conrad Raj, TODAY | Posted: 17 November 2008 1109 hrs

SINGAPORE - It is right that the Singapore Government not bail out Las Vegas Sands' integrated resort project on Marina Bay.

After all, why should taxpayers' money be used to bail out a huge gamble by Sheldon Adelson, who was once the richest man in Las Vegas?

According to Senior Minister of State for Trade and Industry S Iswaran, there's been no request for a Government bailout from Marina Bay Sands, nor does the Government intend to give one.

Sands, whose shares have seen 95 per cent of their value wiped out from their peak, is facing a huge credit crunch. As a result, it will not be able to complete the entire project as scheduled by the end of next year. Instead, it will open the IR in two phases - Phase One at the end of next year and Phase Two the following year.

Mr Iswaran noted that the Singapore Tourism Board had not decided if the casino operator would be penalised for changes to the development agreement.

"Their proposal was to complete the whole project by 2009. If there's a variation to that, we need to look at that and see whether there are legitimate reasons for it," he said.

But is this really the right time to talk about penalties for delays to the project?

Mr Adelson needs to borrow billions to stave off bankruptcy and to help keep his US$4-billion (S$6-billion) project here alive. Such talk about penalties only goes to make already nervous bankers even more cautious about funding the project.

Although Sands has said that its S$5.44-billion credit facility to support the Marina Bay development was in place, there is nothing to prevent its financiers from pulling their lines. The parent company, as at September 30, had total outstanding debts of US$10.35 billion, largely the result of an overambitious expansion plan which not only included Singapore, but also extension of its facilities in Macau and Las Vegas.

But there is also nothing to prevent others in the private sector, including Government-linked companies, from bailing out the Marina Bay project or even Sands itself - if it makes commercial sense.

While CapitaLand, the country's largest property developer, has denied being in talks with Sands, it also noted in a recent statement to the press that, "In the present continuing global recessionary environment, CapitaLand is strategically watching the situation, studying opportunities related to distressed companies or assets, in Singapore and other core markets, that will have strategic fit with our core business areas".

It went on to add that "potential opportunities will be carefully explored and evaluated, ensuring that an acquisition is made only at the right time, right price and when target returns are met given the current difficult economic operating environment".

Having lost out on its original bids for the two casino licences, that opportunity for distressed assets could now present itself if Sands is unable to obtain adequate funding from elsewhere. As at the end of its third quarter, CapitaLand had a net gearing ratio of 0.5 and a cash balance of S$4.2 billion. The Temasek-linked company need not take over the whole project but could invest in a significant, perhaps even in a controlling, stake in Sands Marina Bay.

The other potential white knight for Sands could be the Singapore Totalisator Board, which in April this year re-branded itself as the Tote Board.

The Board is already the country's leading gambling institution and runs the Singapore Turf Club through its agent and wholly-owned subsidiary, Singapore Pools, which runs the 4D, Toto, Singapore Sweep and football betting outlets on the island.

While it says that as a rule it will not fund commercial projects for the purpose of profit-making and debt or loan repayments, there is nothing in the rules that says it cannot take a stake in such projects.

An integrated resort like the Marina Bay Sands would be an almost perfect fit for the Board itself or any of its two main subsidiaries. It's a gamble that is perhaps worth taking. - TODAY/fa