Las Vegas Sands, Venetian Macau up on new financing; Cash, LCDX slide; U.S. Silica fills out

By Sara Rosenberg

New York, Nov. 12 - Las Vegas Sands Corp. and its subsidiary, Venetian Macau, saw their bank debt levels head higher on Wednesday on the back of news that Las Vegas Sands has raised a substantial amount of funds, resulting in the extinguishment of worries about a covenant breach.

Also in trading, NRG Energy Inc.'s strip of institutional bank debt was a touch better as Exelon Corp. launched a hostile takeover of the company, and the cash market in general and LCDX 10 weakened with equities.

Over on the new deal front, U.S. Silica Co.'s term loan A has received enough orders to fill out the book, although lenders are being given till the end of the week to throw in their commitments, and the expectation continues to be that pricing will stay at original terms.

Las Vegas Sands, Venetian Macau trade up

Las Vegas Sands strip of term loan debt and Venetian Macau's term loan were stronger during the trading session as investors rejoiced that the company avoided non-compliance with a covenant by raising additional financing, according to traders.

The Las Vegas Sands strip of delayed-draw term loan and term loan B debt was quoted at 61½ bid, 64 offered, up 3½ points when compared to Monday's levels, by one trader, and at 62 bid, 65 offered, up from Friday's levels of 57 bid, 58½ offered, by a second trader.

The Venetian Macau term loan was quoted at 66½ bid, 68½ offered, up three points on the day, the first trader remarked.

Leverage ratio breach a thing of the past

Last week, Las Vegas Sands had warned that it would likely be unable to comply with its credit facility leverage ratio for the quarter ended Dec. 31, unless it achieved increased levels of adjusted EBITDA, decreased the rate of spending on development projects, obtained additional financing, the proceeds from which could be used to reduce net debt, and/or elected to contribute up to $50 million of capital from cash on hand to its Las Vegas operations.

At that time, the company said it was working with its financial advisor to develop and implement a capital raising program that would be sufficient to address funding needs, but that if additional funds were not raised, the company would need to obtain waivers or amendments under the credit facility. And without these waivers/amendments, a default would occur that would trigger cross-defaults under other financing agreements.

Then, this past Tuesday, Las Vegas Sands announced that it successfully priced a public offering of common stock and priced an offering of series A preferred stock and warrants, raising about $2 billion in net proceeds and solving the leverage covenant breach problem.

The common stock offering is estimated to raise about $959 million in net proceeds, the sale of series A preferred stock and warrants is estimated to raise around $503 million in net proceeds and the sale of series A preferred stock and warrants to the family of Sheldon G. Adelson, the company's chairman and chief executive officer and principal stockholder, is estimated to raise around $524.5 million in net proceeds.

Proceeds from the offerings will be used for general corporate purposes, which may include repayment of debt under the company's revolver and the financing of construction and development projects in Las Vegas, Macao, Singapore and Pennsylvania.

The transactions are expected to close on or about Nov. 14.

Las Vegas Sands shrugs off downgrade

Investors were so pleased with the Las Vegas Sands financing actions that even news of a ratings downgrades didn't end up bringing the bank debt lower, according to a trader.

On Wednesday, Moody's Investors Service lowered, among other things, Las Vegas Sands' corporate family rating to B2 from Ba3.

Moody's said that the downgrade was a result of the company's considerable leverage, the continuation of significant negative trends in Las Vegas, and expectation that these trends will continue in the foreseeable future.

Moody's continued to say that the downgrade also considers recent visitation restrictions in Macao, China, that will likely slow Las Vegas Sands' rate of growth in that market, at least until the Chinese government decides to relax these travel restrictions.

When announcing earnings on Monday, Las Vegas Sands had admitted that given the current conditions in the global credit environment, it has elected to significantly slow the pace of its development activities on the Cotai Strip, including a suspension of our development on sites five and six of the Cotai Strip, and focus current efforts on maximizing our cash flow and returns on invested capital from existing properties in Macao:

Las Vegas Sands is a Las Vegas-based developer of multi-use integrated resorts.

NRG inches up

NRG's strip of institutional bank debt was a touch better on Wednesday after Exelon took its buyout offer directly to shareholders, since NRG's board of directors turned down the proposal earlier in the week, according to trader.

One trader said that NRG's term loan and letter-of-credit facility strip was quoted at 88¼ bid, 89¼ offered, up from 87½ bid, 89 offered on Monday, and a second trader said that the strip was quoted at 88 bid, 89 offered, compared to Monday's levels of 87½ bid, 89 offered.

On Wednesday, Exelon announced that it launched an exchange offer for all of the outstanding shares of NRG common stock at a fixed exchange ratio of 0.485 Exelon shares for each NRG share.

Exelon said its exchange offer ensures that NRG investors have the opportunity to consider for themselves the merits of Exelon's proposal.

The exchange offer will be subject to customary conditions, including the tender of a majority of NRG shares, calculated on a fully diluted basis.

On Sunday, NRG's board had rejected the same acquisition proposal, saying that it undervalued the company and was not in the best interest of shareholders.

NRG is a Princeton, N.J.-based owner and operator of diverse power generation portfolios and Exelon is a Chicago-based electric utility.

Cash, LCDX soften

The cash market in general and LCDX 10 were both noticeably weaker in a trading session that saw "pretty decent volume" as stocks plummeted, according to a trader.

Cash overall was estimated to be down about one to two points on the day, the trader said.

And, LCDX 10 was quoted at 84.85 bid, 85.25 offered, down from Monday's closing levels that saw a midpoint of around 86.50.

Nasdaq closed down 81.69 points, or 5.17%, Dow Jones Industrial Average closed down 411.30 points, or 4.73%, S&P 500 closed down 46.64 points, or 5.19%, and NYSE closed down 313.67 points, or 5.57%.

U.S. Silica nets orders

Moving to the primary market, U.S. Silica's $102 million seven-year term loan A is subscribed and there are still a number of accounts working on the transaction that were given till Friday to place their orders, but the banks are trying to push them to act faster than that deadline, according to a market source.

In addition, pricing on the term loan "looks like it will hold" at initial price talk levels, the source said.

As was previously reported, the term loan A was launched with talk of Libor plus 550 basis points with a 3.25% Libor floor and an original issue discount of 97.

Earlier in the syndication process the term loan A had been downsized by $43 million from $145 million.

U.S. Silica leverage 2.1 times

With the downsizing to U.S. Silica's term loan A, the company's senior leverage is 2.1 times, as opposed to 3.0 times under the original structure.

Proceeds from the loan will be used to help fund the buyout of the company by Golden Gate Capital and Preferred Unlimited.

The $43 million in lost term loan funds was made up through a variety of ways - the equity financing for the deal was increased by roughly $12 million, the mezzanine financing for the deal was increased to $80 million from $74 million, the purchase price for the company was reduced and some customer contracts are helping to make up the difference as well.

Leverage through the mezzanine debt is 3.75 times, as opposed to 4.5 times under the original structure.

BNP Paribas is the lead bank on the loan that was originally supposed to wrap up last week but the books were left open as investors and the banks were and are still waiting on ratings from Moody's and Standard & Poor's.

Ratings are hoped to be announced any day now, the source added.

U.S. Silica loan shopped to variety of lenders

Although the U.S. Silica deal is being called a term loan A, the debt is being marketed to a combination of banks and institutional investors. There was no pre-marketing stage for this term loan and, currently, the company does not have an existing lender base. U.S. Silica did get a credit facility about a year and a half ago, but that debt has already been taken out.

Amortization on the loan is 2% in the first two years, 11% in year three, 12% in year four, 15% in years five and six, and the remainder in year seven.

Covenants include total leverage, minimum interest coverage and minimum fixed charge coverage.

The company has an existing $35 million ABL revolver that is going to remain in place following completion of the new term loan.

U.S. Silica is a Berkeley Springs, W.Va.-based producer of ground and unground silica sand, kaolin clay, aplite and related industrial minerals.

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