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SBE Can't Raise SLS Cash, Extends Escrow

By Chuckmonster on Friday, 16th November 2012 3:02pm
  » filed under Las Vegas  comments: 10


One could say that the story of SLS Las Vegas is a good indicator on how Vegas fans should rate their media. One one side, there are those who trumpet the hype, ask no questions and further burnish any and all adjective laden PR doodoo squirting forth from Mount Nazarian.

On the other side... a small rag tag bunch of questioners informed by experience and arithmetic. Fortunately for us, there are other truth tellers in the world who rely on simple math and common sense - one of them being Standard & Poor.

Earlier this week, S&P quietly published a summary on Stockbridge/SBE Investment Co. LLC, holders of Sahara's neutered at garage sale bag. Their conclusion is to give the investment a negative rating, describing their business risk profile as "vulnerable" and financial risk profile as "highly leveraged."

While giving SBE credit for creating demand for their nightlife and dining destinations throughout their portfolio, S&P subtracts points for SLS/Sahara's "disadvantaged" location and a highly competitive market which isn't conducive to single property operators.

Yeah, we knew this already. But here comes the Double Bacon Whopper... S&P tells us that SBE/Stockbridge has extended escrow on J.P. Morgan's $300M loan for three more months due to their inability to secure the additional $115M of credit before the early November deadline. SBE will continue to pay interest on the escrow loan.

The release of the term loan proceeds is contingent on SLS raising $115 million in junior-priority debt with a blended cash interest rate not in excess of 6% within the next 3 months. If SLS cannot raise the additional financing, the term-loan proceeds will be returned to lenders. As a result, construction and development of the project will not begin until the junior-priority financing is raised and proceeds from the term loan are released from escrow.

The long and the short of it? Sam Nazarian better believe the fiscal cliff vanishes and Santa Claus is real.

Thanks to fivehundy for the super tip on the S&P analysis. Also... see Two Way Hard Three for the Admiral's forthcoming take on this.

Tagged: sbe entertainment   sam nazarian   sahara   


Comments & Discussion:

What a coincidence... the expiration date on this plate of crow is also three months away.

I never heard of this: "SLS intends to finance the junior-priority funds from the U.S. Immigrant Investor Program."

I suggest that VIMFP not be scheduled for SLS Las Vegas in 2014.


When you look back at all of those grand plans for the Sahara that Sammy Boy & Company were hyping after buying the place that never happened because they couldn't get the $$$ for it, what makes this plan any different?

SLS might be a good idea if they had acquired a smaller property and decided to convert it to SLS as opposed to the Sahara.

You've completely misinterpreted how S&P ratings work when you say that S&P gave SLS a "negative rating". This is a bond rating, not an equity rating - what B-/negative means is that this is a B- credit that is more likely to become a C+ credit than a B credit.

Now that is a terrible rating, by the way - suggesting this is highly speculative debt, which further suggests that there is negligible value to SLS' equity. But the word "negative" in and of itself is meaningless - its better to be B-/negative than C+/positive.

Having just been a jerk about something technical, I of course made a technical error myself - the next rating down from B- is CCC+, not C+. Oops.

I still wouldn't put it past Sami Boy to get the deal done, more or less. I think the finished product will be closer to the Sahara than Style-Luxury-Sophistication. I think the Las Vegas Strip is one of the 10 most iconic locations on the face of the earth, and as long as there are people who will pay as much as it costs to buy a Downtown casino on a super secret birthday party on the Strip a couple weeks ago, or lose $300 million to win a Premier League title for Manchester City last year, there are people who will take a flyer on a couple hundred mil for a stake in a Vegas Strip joint. But, and a big butt, I think the money can only come from outside the United States. I wonder how many Asian gazillionaires can't get into the Macau market, but aren't really worried because they see the "Vegas Strip" as a better way to impress their friends?

Sammy is doing nothing more than emulating the state of California's winning financial strategy. Money? Debt service? These are just public relations obstacles.

If Nazarian just rebuilds what is there and avoids pandering to the hipster crowd he may get things done but when I was in Vegas for VIMP I went down to that part of town and saw that they had taken over the office space used by Fontanbleu and a cold chill went thru me.

Pretty sure The SkyVue will get built and have half of its shops closed before the SLS gets built...

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