Barclays gets IPO role from Sands
Casino operator Las Vegas Sands has handed Barclays its first role in a Hong Kong initial public offering in a decade.
Sands, which wants to sell US$2.5 billion of shares in its Macau unit to repay debt and restart stalled casino projects, added the British bank to the deal alongside its regular adviser, Goldman Sachs.
Barclays won the plum job after helping Sands secure a crucial debt covenant lifeline from its banks after the casino firm nearly breached Macau loan agreements earlier this year, two people briefed on the situation said.
Barclays has not worked on a Hong Kong share sale since closing its BZW investment banking unit in the late 1990s. In Asia, it is best known for lending companies money and selling bonds and does not have a local team that specialises in helping companies go public.
Sands owes US$3.2 billion to its Macau lenders out of a total debt pile of US$10.4 billion. This month, Sands won a crucial six quarters of relief from its Macau loan covenants.
Goldman Sachs and Barclays, as lead arrangers of the loan Sands took out in 2006, helped persuade the rest of the lenders to allow the covenant waiver.
Goldman's role in the share sale was unsurprising, though. It has been advising Sands on fund-raising strategies for over a year.
Hong Kong's status as foreign investors' gateway to China means initial public offerings are a major money-spinner for banks here.
If Sands' share offering happens, Goldman and Barclays could share US$75 million in advisory fees, according to standard industry payment terms. And rival bankers, keen not to face even more competition in town, are already talking up what they perceive as Barclays' lack of credentials on this deal.
'Goldman may have to do a lot of the heavy lifting [on this IPO],' one senior banker at a rival firm said.
Barclays declined to comment.
The public offering has potential pitfalls. Sands' bankers must show it is a good time to invest in Macau, where the casino business is insecure because Beijing often restricts the number of trips mainland citizens can take to the gaming enclave.
They will also have to persuade money managers to take a rosy view of a highly indebted firm that has been grappling with project over-runs and delays. Sands suspended construction on its Cotai hotel and casino development in Macau last November, causing 11,000 job losses.
Competitor Wynn Resorts, which has not delayed any of its projects, is also planning to raise up to US$1 billion in a Hong Kong share sale in October. The Sands share sale may not be ready until next year.
Fund managers have said they may not have space in their investment portfolios for two Macau businesses.
Before Sands won the Macau covenant reprieve earlier this month, it was close to breaching the terms of the loan it took out in 2006 to fund its vast Venetian and Sands Macao resorts. Sands' Macau lenders required the firm to make a dollar of profit in the gaming city for every four dollars of cash it borrowed.
Sands just hit this target in the second quarter, reporting a debt to profit ratio of 3.83 times. In the second half, the loan-to-profit targets were to become more stringent. But now lenders are gambling on Sands raising cash in this offering, they have freed the casino giant from having to hit these targets for 18 months.
Barclays purchased the US and European businesses of collapsed Wall Street bank Lehman Brothers last September. Lehman was a lead arranger of Sands' Macau loan, and Barclays inherited that job when it bought Lehman.
