A $975 million credit for Venetian Casino Resort is coming to the table with investors excited about the performance of the company, but concerned by the single-project nature of the loan. The bank meeting is scheduled for today at the Venetian in Las Vegas. Goldman Sachs is leading the credit and Scotia Capital is administrative agent.
The loan, comprising a $125 million revolver, $90 million delay-draw "A" loan, $105 million delay-draw "B" loan and $655 million "B" loan, will be used to finance the Venetian's Palazzo casino resort project and refinance existing debt. "People are excited--it's the Venetian," a banker said. "This team has proved they can obviously be successful in Vegas and a second tower will be too." There is not yet price talk on the credit, the banker said.
"It's a seasoned name and good industry. Now that the thing has kind of proven itself over the years," a buysider said. "It certainly survived the dark days in travel downturn," he added. "Investors have gotten more comfortable with the stability in the overall gaming industry," added Michael Scerbo, an analyst with Standard & Poor's. The gaming industry was impacted by the events of Sept. 11, 2001, but rebounded solidly since that time, he added. Also, interest in the casino sector is picking up with two large casino acquisitions announced recently--Harrah's Entertainment's buyout of Caesars Entertainment and MGM Mirage's purchase of Mandalay Resort Group.
But there are dangers anytime you have a single property and are dependent on one source for cash flow, Scerbo noted. "A shock to that source of cash flow can impact the overall company," he said. The investor said it might be a long shot for his institution because they generally don't like investing in single projects with just one asset.
In addition to the credit, the project will also be financed using a $135 million equipment financing, operating cash flow, proceeds from the recently completed sale of the Grand Canal Shoppes Mall and a $250 million construction loan for the new Palazzo mall. Scotia is leading the $250 million construction term loan, which is also launching today. The loan is oriented towards real estate lenders and is priced at LIBOR plus 1 3/4%, a banker said. General Growth Properties will purchase the Palazzo mall once it opens. The Palazzo casino resort project will have more than 3,000 new hotel suites, a 105,000 square foot casino and a 375,000 square foot mall. Goldman and Scotia bankers declined comment. Harry Miltenberger, the company's v.p. finance, did not return calls.