Las Vegas Sands (NYSE: LVS) modestly increased its stake in its Sands China unit, taking its equity ownership in the Macau casino giant to just over 75%.
In a Tuesday regulatory filing with the Hong Kong Stock Exchange — the home bourse for Sands China — the two companies revealed that the US-based parent, through an indirect wholly controlled unit, bought 1.62 million shares of Sands China on the open market.
In dollar terms, it was a small transaction valued at $2.85 million, but it slightly increased Sands’ position in the Macau concessionaire to 75.01% from 74.8%.
Las Vegas-based Sands previously said it would look to periodically increase its stake in the Macau unit, which runs five integrated resorts in the lone Chinese territory where casino gaming is legal.
Why the Increased Sands China Stake Matters
On the surface, Las Vegas Sands buying less than $3 million worth of Sands China equity isn’t a “big deal.” However, the parent company moving above a 75% interest in the Macau operator, albeit just barely, is significant from a regulatory perspective.
The Hong Kong Stock Exchange requires member firms to freely float 25% of their shares, but there are exceptions provided that companies not meeting that 25% mandate move from what’s known as the “Initial Prescribed Threshold” to the “Alternative Threshold.” Sands China informed investors it did just that.
“The Company announces that, with effect from the Latest Practicable Date, the Company has changed its reliance from the Initial Prescribed Threshold to the Alternative Threshold for compliance with Rule 13.32B of the Listing Rules, which also allows greater flexibility for the Group in conducting transactions for capital management purposes in the future,” according to a regulatory filing with the Hong Kong Stock Exchange.
Sands China’s quintet of Macau venues are the Londoner, the Parisian, the Plaza, Sands Macau and the Venetian, which is one of the most profitable casinos in the world.
More Las Vegas Sands Financial Tidbits
Moody’s Investors Service recently affirmed Las Vegas Sands with a ‘Baa3’ senior unsecured rating and a ‘stable’ outlook, but the ratings agency notes that those marks could be pressured if Sands pursues large-scale development projects that are heavily financed with debt.
“Continued dividends, share repurchases and the use of secured debt to fund developments also constrain the credit profile,” according to the research firm.
Citing the $8 billion expansion effort at Marina Bay Sands in Singapore, Moody’s sees Sands’ leverage remaining elevated at least 3.4x over the next 12 to 18 months.
