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Best of Liz Benston

Gaming Guru

Liz Benston

Adelson bails out Sands with talk, cash

17 November 2008

LAS VEGAS, Nevada -- There are plenty of gambling metaphors that fit the impressive bailout of Las Vegas Sands last week by its chief executive, Sheldon Adelson.

By investing another $525 million of his family's money in the company, on top of $475 million he put up in September to keep it out of default, he was doubling down.

Yet he was also chasing losses, of at least $4 billion in September during the Wall Street meltdown that pummeled the stock market — the steepest decline among the Forbes list of 400 richest Americans.

Adelson, Forbes' third-richest American in 2007, was a symbol of fortune during the tourism boom. He's now generating national headlines, with words including "biggest loser," reserved for hard-luck gamblers.

Because a $2.1 billion financing package will likely keep Las Vegas Sands out of trouble with lenders for some time, Adelson's cash infusion isn't so much a roll of the dice as a firm indication of just how much he believes in his business model.

His formula, which he sells in nearly every speech, is giant, mass-market resorts filled by conventiongoers during the week and fun-seekers, but not necessarily gamblers, on weekends.

In an industry of speculators, Adelson has been one of the biggest risk-takers.

His famous stubbornness and disregard for business norms has made him the richest man in the casino business, even after recent losses.

After selling his successful Comdex computer trade show in 1995, he defied skeptics by building not more hotel rooms but a massive convention center behind the Sands hotel. When he opened the Venetian resort on the Sands site in 1999, he used a model others said wouldn't work in Las Vegas, selling top-dollar rooms to conventioneers midweek.

The junk bonds used to finance the Venetian were expensive, carrying double-digit interest rates that were partly a reflection of Adelson's nonexistent track record in gaming.

Cost overruns and construction delays added to the Venetian's cost, resulting in a cash infusion from Adelson.

His was the first American casino company in Macau, a legendary gambling enclave that promised epic profits and, at the same time, uncertainty in the form of visa restrictions by mainland China and an overheated building boom rivaling the Strip's.

While other companies grew more conservatively, Las Vegas Sands proposed a jaw-dropping plan to build a multibillion-dollar Las Vegas-like Strip in Macau with as many as eight sites for resorts and casinos.

While competitors built one property at a time, Las Vegas Sands borrowed billions for multiple projects, starting some of them without having all of the money upfront or before newly built properties had generated more cash to support future growth.

This aggressive strategy worked well during the lending boom, when capital was cheap and plentiful.

Adelson may be a bold businessman but he's not spendthrift. On the contrary, he has put up money only when observers thought he had little other choice.

Las Vegas Sands passed on opportunities to raise additional money last year, just before the credit markets curtailed lending. The company's earnings in Macau turned out to be less than projected because of increased competition, while the economic downturn hurt its profit in Las Vegas.

After last week's events, few doubt the company's ability to weather the downturn over the long term, however.

The bigger question is whether Adelson, who has plowed money into his own company three times and might do so again, will end up extremely wealthy or merely rich.

Adelson is now worth an estimated $11 billion.

He's hardly the country's "biggest loser," or much of a gambler.

Just a true believer.