Wednesday, November 12, 2008

"Singapore government will not bail out Las Vegas Sands"

The story is here. And to refresh your memory, my previous post on this is here.

This just gets better and better...

From the story:

"He [Minister of Trade and Industry S Iswaran] revealed that Sands had asked the Singapore Tourism Board to adjust the timelime for the construction of the Marina Bay Sands resort."

As I had expected, one of the requests that Las Vegas Sands would make would be a postponement of the opening date of Marina Bay Sands. The fact that Minister Iswaran has made it clear that a Singapore bail-out is not on the table is suggestive that perhaps Sands had made just such a request.

I'm not surprised that a bail-out by the government is not in the works. Given the resistance by the religious community towards the idea of integrated resorts in the first place, a bail-out would have that community up in arms (which incidentally conjures up a really strange image). In fact, I wouldn't rule out a few inflamed letters by the more religiously inclined in the media or in the blogosphere on how God is punishing the House of Mammon and Filthy Lucre.

As an aside, my sister-in-law works at the Singapore Tourism Board, in the accounting department no less!, and while I didn't probe too deeply, I came away with two things talking to her. First, Sands is in deep trouble (like...duh.) Second, the STB's balance sheet is tiny, so a bail-out even if it occurred, would have to be orchestrated by the larger government.

I know, I know, these aren't exactly blinding insights...but anyways, back to the article:

"Mr Iswaran added there is no reason to think that a large proportion of planned jobs for the project will be lost, although they may be put on hold."

After the play-up of how the Integrated Resorts will help save the economy, this is as euphemistically styled a sentence as I have ever seen. Riiight, after all, a recession is only a temporary bump on the road to prosperity. Tell that to Iceland yah?

"While the government would not participate in any bailout of Sands, Mr Iswaran did not rule out the involvement from government-linked companies, which are commercial entities, if it makes business sense to do so.
'They have to make their own decisions on whether an investment makes sense for them or not. It's not for the government to tell them what to do' Mr Isawaran told journalists."

Oooh, this is most interesting, and I have to admit that it's crossed my mind a couple of times.

The government has now gone on record that they will not bail out Sands. Most people would agree that the Marina Bay Sands project must survive (if only for face), so if Sands defaults and files for Chapter 7 or 11, something must happen to allow the project to continue.

The government is not in the business of running casinos, so an external party must be brought in to manage the project. Who then? Minister Iswaran has said that the government will not strong-arm a GLC into taking on the project, but given the ongoing credit crunch, unless the new project terms are very attractive, and with generous guaranteed financing, no company will want to take on the project.

So how will the project fly if Las Vegas Sands abandons it? Other than strong-arming a GLC, or giving a covert bailout generous financing to a new project manager (I don't think any gaming company is in a very healthy situation right now, Harrah's is a perfect example), is there a third option?

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