Las Vegas Sands Alters $1.5B Credit Facility Further Delaying Dividend Restoration

Las Vegas Sands (NYSE: LVS) reached an agreement with lenders to amend select covenants in a $1.5 billion revolving credit facility — a move that further delays the casino operator’s plans to restore its quarterly dividend.

Sands dividend
Sands dividend
Sands Cotai Central in Macau. The operator amended a credit facility and that could delay resumption of its dividend. (Image: CNBC)

The Parisian Macau operator revealed the amendments to the credit facility in a Form 8-K filing with the Securities and Exchange Commission (SEC). The amendments include alterations to calculations of Sands’ consolidated adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for repayment purposes, allowing more flexibility.

Pursuant to the Amendment, the Existing Revolving Credit Agreement was amended to extend the period during which the Borrower is required to maintain a specified amount of minimum liquidity as of the last day of each month to December 31, 2023,” according to the regulatory filing.

Bank of Nova Scotia and a consortium of other lenders are the creditors on the $1.5 billion revolving credit facility. Prior terms of the agreement were set in August 2019. The parties amended that agreement in September 2020.

Sands Dividend Dilemma Continues

Under the terms of the newly amended credit facility, the only way Sands can restart its quarterly dividend before the end of this year is if its pro forma liquidity exceeds $1 billion, according to the filing.

That dashes hopes that amid a recovery in Macau — the company’s largest operating market — LVS could resume its payout in 2023. In April 2020, with its hand forced by the COVID-19 crisis, Sands suspended its dividend. At that time, the annual payout was $3.16 per share, good for one of the highest in the gaming industry.

Not only was LVS one of the biggest dividend payers among casino operators prior to that suspension, it also had one of the industry’s best track records of payout growth. There was hope the dividend would be restored last year. But in exchange for getting approval from creditors to sell its Las Vegas assets, Sands agreed to hold off on restarting the dividend.

Eliminating the payout was a tough call for the late Sheldon Adelson, as the former LVS chairman and chief executive officer was known for saying, “Yay, dividends!” Today, his widow, Dr. Miriam Adelson and other heirs, control the majority of LVS’ shares outstanding and some analysts say the family is unlikely to significantly reduce that stake until the payout resumes.

Sands Gains Flexibility, Dividend Still on Radar

By amending the credit facility, Sands gains some breathing room, which is crucial as the company needs to make new nongaming investments in Macau, eyes enhancements to Marina Bay Sands in Singapore, and vies for new  projects, including in New York.

None of those factors mean the dividend is off the company’s list of priorities. Far from it. On the operator’s fourth-quarter earnings conference call last month, President and COO Patrick Dumont — Adelson’s son-in-law — noted the payout is a priority.

As cash flows normalize, Sands could “look to start the dividend again and be very shareholder friendly,” Dumont told analysts.

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