Sands Dividend Unlikely Before 2025 Following Revised Credit Agreement

Las Vegas Sands (NYSE: LVS) announced its Sands China unit amended and restated a credit facility pact with lenders, meaning it’s unlikely the casino operator will restart its quarterly dividend prior to 2025.

Sands China
Sands China’s Venetian Macau. The operator is likely to delay the restart of its dividend to 2025. (Image: Wall Street Journal)

Under the terms of the new agreement, the credit facility allows for borrowings up to $2.49 billion, but Sands China must extend by 18 months the period in which it doesn’t pay dividends, assuming borrowing on the revolver exceeds $2 billion. Sands China operates five Macau integrated resorts and the parent company’s only other venue is Marina Bay Sands in Singapore, meaning that if the China unit can’t pay a dividend, it’s unlikely the parent company will.

Amended the maximum permitted Consolidated Leverage Ratio (as defined in the A&R Facility Agreement) as at the last day of each of the financial quarters ending March 31, 2024, June 30, 2024, September 30, 2024, December 31, 2024, and March 31, 2025 and subsequent financial quarters to be 6.25x, 5.50x, 5.00x, 4.50x, and 4.00x respectively; and (e) extended to (and including) January 1, 2025 the period during which Sands China’s ability to declare or make any dividend payment,” according to a Sands 8-K filing with the Securities and Exchange Commission (SEC).

In simple terms, the casino operator must meet certain leverage requirements prior to creditors signing off on dividend resumption.

Not New Territory for Sands

Dividend restrictions in exchange for access to more capital or more favorable terms on loans are commonplace in the business world and it’s something Macau operators have dealt with in the wake of the coronavirus pandemic. Sands China is part of that group.

There was hope the dividend would be restored last year. But in exchange for getting approval from creditors to sell its Las Vegas assets, Sands agreed to hold off on restarting the dividend. Entering this year, there was hope the operator could restore its payout in some form. Now, that appears unlikely.

In April 2020, with its hand forced by the COVID-19 crisis, Sands suspended its dividend. Back then, the Venetian Macau operator paid $3.16 a share annually. Not only was that the industry’s largest payout, but Sands also had an enviable track record of increasing the dividend.

For now, it appears that Sands’ dividend options boil down to driving leverage down more swiftly than expected so it can appease creditors and potentially surprise shareholders with an earlier dividend resumption or play the long game and incrementally firm its balance sheet with an eye toward to resuming the payout in 2025.

Some Dividend Pressure on Sands

News of Sands’ delayed dividend restart emerged just days after rival Wynn Resorts (NASDAQ: WYNN) said it’s resuming its quarterly payout to the tune of 25 cents a share.

With that move, Sands and Caesars Entertainment (NASDAQ: CZR) are the only non-dividend payers among the four largest US-based casino operators.

Add to that, dividends are perking up among select regional casino operators, indicating equity income investors have an increasing amount of choices in the gaming industry. That also means Sands’ sole source of attraction to market participants is the potential of capital appreciation, which isn’t promised.

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