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Japan – Sands well positioned to absorb Japanese IR cost

By - 15 October 2019

Fitch Ratings said it has ‘increased confidence’ in Las Vegas Sands’ ability to build an integrated resort in Japan without any major affects on its leverage ratio.

Sands will spend at least $10bn on a casino in either Tokyo or Yokohama if it is successful in either of those two bids. It has already committed to spending US$2.2bn on its Sands Cotai Central property in Macau as it transforms it into The Londoner Macao alongside an investment of US$3.3bn to fund the expansion of its Marina Bay Sands in Singapore.

Fitch said: “Las Vegas Sands is in a good position to bid on an IR license in Japan, but Fitch does not expect heavy capex spending in Japan to occur until 2022 at the earliest. There is increased confidence that Sands can absorb a large-scale development such as a Japan IR without material long-term deterioration in the leverage credit metrics or liquidity strain.

“In the context of reasonable assumptions for a project in Tokyo or Yokohama, should Sands win a license, Fitch believes Sands can achieve the maintenance of pro forma gross leverage under 3.0x and under more conservative scenarios, be in position to deliver to below 3.0x in a reasonable time period (one to two years).”

Fitch isn’t concerned about the renewal of licences to operate Sands’ six casinos licences in Macau in 2022. It explained: “The risk of the concession not being extended is very remote. A more plausible risk is Sands being subject to onerous extension terms, such as a higher tax, a concession payment, or a call by the government for significant lower ROI investments,” it explained. “Fitch believes that the government will take a programmatic approach to renewing the gaming concessions expiring 2022. Gaming is a major source of employment and tax revenues, and the concession holders, Sands in particular, scored well in the government’s mid-period review.”

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