拉斯維加斯金沙集團 (LVS) 2008 Q4 法說會逐字稿

Good afternoon.

My name is Chenille and I will be your conference operator today.

At this time, I would like to welcome everyone to the Las Vegas Sands Corp.

Q4 earnings conference call.

(Operator Instructions).

I would now like to turn the call over to William Weidner, President and COO.

Please go ahead, sir.

Good afternoon, everyone, and thank you for joining us today.

On the call with me today will be Sheldon Adelson, our Chairman, who will be joining us by teleconference; Brad Stone, President of Global Operations and Construction, who has joined us by teleconference in Macao; and on the teleconference with Brad are Stephen Weaver, our President of Asia; Leonard D'Angelo, our Senior Vice President of Operations for Asia; Matthew Pryor, our Senior VP of Construction and Development; and Ben Toh, our Senior VP of Finance in Macao.

Here with me in Las Vegas are Rob Goldstein, President of the Venetian and the Palazzo; Ken Kay, our Chief Financial Officer; Al Gonzalez, our Senior VP and General Counsel; Scott Henry, our Senior VP of Finance; and Dan Briggs, our Vice President of Investor Relations.

Before I begin, I need to remind you that today's conference call contains forward-looking statements that we are making under the Safe Harbor provisions of federal securities law.

I would also like to caution you that the Company's actual results could differ materially from the anticipated results in those forward-looking statements.

Please see today's press release under the caption Forward-Looking Statements for a discussion of risks that may affect our results.

In addition, we may discuss adjusted EBITDA, adjusted net income, adjusted EPS and adjusted property EBITDA, which are non-GAAP measures.

A definition and a reconciliation of each of these measures to the most comparable GAAP financial measures are included in the press release.

Please note that this presentation is being recorded.

By now, over the last few moments, you should have all received our press release detailing our financial results for the fourth quarter of 2008.

Our agenda for today's call is as follows.

First, I will give an overview of our business and the plan we outlined in our third-quarter call.

I will then turn the call over to Rob Goldstein and to Brad Stone to talk about our fourth-quarter operating performance in Las Vegas and Macao, respectively, including the cost reduction measures we have implemented throughout the organization in an effort to increase efficiency and reduce our operating expenses during this period of challenging operational conditions.

From there, Brad and Matthew Pryor will discuss our developments in Singapore and Bethlehem, Pennsylvania, as these properties move toward their respective openings about four months from now, in the case of Sands Bethlehem, and less than a year from now for Marina Bay Sands.

Stephen Weaver will then provide an update on our Macao asset sales processes, the Four Seasons apartment hotel and our Macao retail malls.

I will also then make some closing remarks before moving on to your questions.

I don't need to remind you of the significant uncertainty the markets and the economy are currently experiencing.

The good news is that despite the current economic uncertainty, people are continuing to visit our properties in both Las Vegas and Macao in great numbers.

We are generating significant cash flow from our properties.

The bad news is that people in both of those markets are clearly spending less once they arrive.

While we cannot control consumer confidence or know when the market conditions will improve, what we can and will do is control our cost structure and focus all of our collective efforts on the disciplined execution of the business plan we introduced in November.

Our plan has three basic components, where our objectives in those plans are to first maximize cash flow from our current operating properties in Las Vegas and Macao; second, to deliver our two ongoing developments, Marina Bay Sands in Singapore and Sands Bethlehem in Bethlehem, Pennsylvania, on time and on budget; and third, to generate liquidity through the sale of noncore assets.

We have made progress on each of these components of our plan since its adoption, and we're focused on executing it in spite of the challenging economic conditions in which we are all operating.

With respect to the first component of our plan, maximizing cash flow from current operations, we have identified and are implementing over $250 million of run rate cost savings across our Company, significantly reducing the revenue risk in our plan.

Our ability to control our costs across the entire organization is a critical component of our plan, and we will continue to seek opportunities to run our business more efficiently in today's environment.

These cost control measures will be accomplished in a disciplined fashion, one that maintains the customer experience for our guests.

While cost management discipline is our principal tool of maximizing cash flow in today's environment, we will also continue to invest in targeted opportunities to increase our cash flow where those opportunities exist in our businesses -- for example, in our mass gaming and slot business and related CotaiJet ferry service in Macao.

Turning to the second component of our plan, the delivery of Singapore and Bethlehem developments on time and on budget, we are making steady progress and both developments are tracking according to plan.

In Singapore, we continue to target late '09 for the opening of the Marina Bay Sands and are working with the Singapore Tourism Board to finalize our opening schedule.

At Sands Bethlehem, our development is progressing steadily toward a planned opening less than four months from today.

You will hear some greater detail on our Singapore and Bethlehem developments from Brad and Matthew in a few moments.

Finally, with respect to the third component of our plan, the sale of noncore assets, we are simultaneously moving forward with formal monetization processes for both the Four Seasons Hotel in Macao and our retail malls, The Grand Canal Shoppes and The Shoppes at Four Seasons in Macao.

While we realize the market conditions for the sale of these assets are clearly less than ideal, the monetization of these assets are an important component of our plan.

We will continue to pursue them in a discipline fashioned.

Asset sales will allow us to reduce debt in Macao and to deliver the Company.

Stephen Weaver, who is heading up the monetization process in Macao, will provide a detailed update later in the call.

Moving now to our fourth-quarter operating results, I will give a brief overview and then turn it over to Rob to provide some color and perspective on our Las Vegas operation, and then on to Brad and his team to discuss our Macao operations.

Overall, our properties continue to generate significant cash flow.

People are continuing to visit our properties in great numbers, but are spending less per visit than they have historically.

Now, while the implementation of our cost savings program at all of our properties is a crucial lever we're utilizing to generate cash in this environment, we believe that both the quality of our assets and the differentiation of our operating strategies, particularly our refocus on group business in Las Vegas and the mass gaming and nongaming market segments in Macao, will be important factors as we manage our business through these tough economic conditions.

With that introduction, I'll now turn the call over to Rob to discuss our Las Vegas operations and give us some more detail.

Rob?

Thanks, Bill.

Thank you very much.

Despite the challenging environment in Las Vegas you referenced in your opening remarks, our Las Vegas operations delivered adjusted property EBITDA of $89.6 million in the fourth quarter.

Last year in the fourth quarter, we generated approximately $106 million of adjusted property EBITDA, but the result last year reflected table game [hold] of approximately 24.1% versus 19.9% in the fourth quarter '08.

Visitation at both properties remains healthy, while our occupancy across two properties is greater than 93%, with the Palazzo Las Vegas reaching an occupancy level of 96% and fourth-quarter ADR of $217.

The Palazzo has just completed its one-year anniversary.

It has continued to ramp and has been very well received.

The ADR on occupancy and healthy gaming volumes reflect its growing appeal.

While we have enjoyed solid visitation and healthy hotel occupancies in both hotels, this demanding economic environment has resulted in decreases in both ADR and revenue per visitor.

Our strategy to maximize cash flow in this environment is to maintain high levels of occupancy at both hotels, expand our room block for gaming customers, pursue additional group business in segments less impacted by this softening economy, and to aggressively manage our cost structure.

Let me spend a moment on the group business.

We have traditionally benefited from a strong foundation in convention and group business, which has enabled us to enjoy higher midweek ADRs and benefit from the strong and profitable group-related revenues.

While we are not expecting group business to be as strong as it has been in the past, we do believe our group business base somewhat insulates us from the difficult conditions in other segments.

We have more group rooms booked for the first quarter of '09 than we had for last year's first quarter, for example.

So while this segment faces challenges, it's certainly very much alive and remains a critical component of our business strategy.

We have been impacted by the recent headlines relating to TARP and the national headlines regarding the Las Vegas business travel.

Hopefully, the inherent value in Las Vegas pricing, diversity of product, terrific access will prevail and enable Las Vegas to remain in its preeminent position as the leader in group business.

We are very confident that it will return to what it should be, which is, this is a value proposition as well as a wonderful place to visit.

Most groups that will cancel in 2009 have already done so.

The cancellations we have experienced create opportunities for us, however, to target smaller groups that we would not have been able to accommodate in the past, including groups who have not had Las Vegas considered as a viable option for their events.

In general, larger groups that are booking business today are booking further out in 2010 and '11.

So we are working to proactively fill any holes we have in '09 with smaller groups and groups with a shorter booking window in a slower economy.

Fourth-quarter gaming volumes across our Las Vegas properties, the Venetian and Palazzo, were up across the board.

We had the best table game player in history, with $504 million of table game drop, and we have a $957 million handle on our slot machines.

Each of those numbers reflects our larger asset base in Las Vegas.

Table game business has held up well, despite this economic environment.

And in January, we've continued to see encouraging trends, especially in the Palazzo's high-end amenities and luxury features, together with the Venetian's loyal customer base, which produced a solid Chinese New Year's performance with very healthy gaming volumes.

Our slot business in the fourth quarter of '08 experienced a 33% growth compared with the prior year and showed an upward trend throughout 2008 as we utilized our larger room inventory to target gaming customer segments who have a validated propensity to gamble.

Despite these positive trends in our business, we are ever mindful of the challenging operating environment in which we live.

In November, we announced our plan to reduce our cost structure.

And since that time, we have recognized -- our program in Las Vegas has recognized over $125 million in annualized cost savings.

We will, however, continue to seek additional opportunities on cost-cutting.

Some of the most important initiatives which we have completed thus far include labor efficiencies, which include an almost 14.3% payroll reduction, reductions in marketing and advertising spend, the implementation of a more streamlined procurement process.

Our objective is to pursue these initiatives while maintaining the overall quality of the guest experience we provide our customers.

So in summary, people are continuing to visit our Las Vegas properties, Venetian and Palazzo, for both business and leisure purposes, but are spending less per visit.

We believe our asset base, with its luxury yet approachable appeal, offers a range of price points that appeals to both a broad scope of visitor budgets and is uniquely positioned to perform with resilience in the current economic environment.

With that, I will hand it back to Bill and look forward to addressing your questions at the completion of the prepared remarks.

Thank you, Rob.

And I think what we can do now is turn it directly to Brad Stone, who is joining us from Macao, to discuss the Macao operations themselves.

Brad?

Thank you, Bill.

Let's start with the Venetian Macao, which generated $112.8 million of adjusted property EBITDAR for the fourth quarter of '08.

Visitation at the property has been strong, with the Venetian Macao enjoying its greatest visitation on record with over 6.7 million people visiting the property during the fourth quarter.

That visitation drove a healthy mass play and occupancy, as well as record slot play and hotel revenues during that quarter.

Our ferry service also carried more passengers in the fourth quarter than any previous quarter, and again increased market shares of customers traveling from Hong Kong to Macao.

Our convention and group business benefited from seasonally stronger fourth-quarter period and accounted for over 100,000 visitors, approximately 17% of the room nights sold.

All these accomplishments occurred despite the visa restrictions which are currently in place in the market and have limited the number of visit to Macao for Chinese citizens residing in certain market areas within mainland China, including Macao's neighboring Guangdong province.

The three-pronged operating strategy for the Venetian Macao that we implemented in 2008 will continue throughout 2009.

The first initiative we talked about was to manage our VIP business.

We expect Macao's market, the overall VIP volumes to decline in 2009 after the unsustainable growth that the market experienced in 2008.

The Macao market's increasingly competitive commission structure significantly reduced the profitability of this business for gaming concessionaires throughout the year of 2008.

While the VIP business remains a contributor to our adjusted property EBITDAR, it is important to recognize that it contributed only around 15% of our adjusted property EBITDAR for the Venetian Macao in the fourth quarter.

Now, given that backdrop, our principal objectives for this business are to carefully manage the business and control our credit risk while developing more profitable direct play, particular from markets outside mainland China, including Japan, Korea, Indonesia, Thailand and Singapore.

During the fourth quarter, our directed VIP play at the Venetian Macao grew 16.7% of our total rolling volume compared to just 6.9% in the fourth quarter of last year and 14.9% in the previous third quarter of this year.

We have achieved this increase in direct play while maintaining our prudent approach to granting credit to our VIP customer market.

While this is a promising development, an increasing amount of rolling play related to cash flow contribution to EBITDAR margins are coming through direct relationships with customers throughout Asia, and we will continue to be conservative and prudent in the expansion of credit, particularly in this current economic environment.

Rolling volume at the Venetian during the fourth quarter was $8.5 billion, reflecting a generally softer environment for VIP play.

As I mentioned, the contribution for the EBITDAR from the rolling volume was approximately 15% of the Venetian Macao's EBITDAR of $113 million during the fourth quarter.

That is down from approximately 32% during the fourth quarter of 2007, when we made $118 million on EBITDAR.

So our ability to generate roughly a consistent level of EBITDAR on far less rolling volume illustrates the increasingly diversified nature of our cash flows.

They're around 40% from nongaming sources and approximately 45% coming from nonrolling table game business and slot business in the fourth quarter of '08.

The second initiative we've talked about is to grow our mass and slot business.

Our CotaiJet ferry service is a key tool to support visitation to the property, and direct correlations between increasing visitation and increasing slot play is an important development in the Macao market's maturation as an integrated resort destination.

The promotional offerings of CotaiJet, which were originally designed to build awareness of the service, are increasingly being targeted to casino customers.

The service continues to drive traffic to the property.

After increasing frequency of sailings in July, CotaiJet has grown its share of ferry passengers arriving in Macao from Hong Kong to greater than 30%.

To put that in perspective, of the 2.5 million ferry visitors who have traveled from Hong Kong to Macao in the fourth quarter in '08, approximately 770,000 of these visitors arrived in Macao at the foot of the Cotai Strip.

That increase approximately of arrivals to the Venetian Macao and the Cotai Strip is one of the important contributors to our record slot play for the quarter, which was up over 55% when compared to the fourth quarter of 2007.

The third initiative we talk about is to control our cost structure.

Bill mentioned in his remarks that our program is to target about $125 million in annual savings across our Macao operations.

This program is designed to reduce our operating costs while preserving as many Macanese jobs as possible and maintaining a world-class customer experience for our guests.

With our developments on 5 and 6 temporarily suspended, we are aligning our headcount with the current rather than future needs of our business.

In January, we reduced the normal hours -- work hours for dealers in Macao from 48 hours to 40 hours.

This change allowed us to save approximately 1000 Macanese jobs while at the same time reducing our headcount by about 1000 FTEs, or roughly our payroll cost by 13%.

In addition, we reduced our overall headcount at the Venetian and Sands by approximately 1800 employees year over year through a combination of write-offs, attritions and transfers to the newly opened Four Seasons property.

Other cost reductions include transportation programs, utilities, general operating costs and many other combinations of initiatives.

So we think those three strategies -- controlling and managing the VIP business, growing the mass and slot business, and controlling our costs -- contributed to a solid performance for the Venetian Macao during this quarter.

Let me spend a moment now on our other Cotai Strip property, the Four Seasons.

This property generated approximately $5 million in adjusted property EBITDAR during the fourth quarter.

We have clearly experienced a slower ramp at the property than we would have liked.

The property has, however, experienced a steady increase both in visitation and mass play in each month since its opening, and awareness of the property has grown.

The Four Seasons hotel has maintained a very healthy ADR of $332 during the fourth quarter, and Four Seasons management has now begun to promote the property to increase occupancy with various bundled packages that include spa treatments, special events including entertainment packages featuring performance of Cirque du Soleil, and events in our Cotai arena.

In April, we open two floors of VIP gaming and premier our 19 Paiza mansions.

These exclusive suites are among the most luxurious in our portfolio and will have their own private gaming tables and will be marketed directly to VIP customers residing throughout the region.

Simultaneous with be the Paiza Suite launch, we will be formally branding the entire casino and will launch a research-tested marketing campaign to introduce the completed property to a segment of the market we believe is underserved in the Macao market today.

Designed to occupy a market niche distinct from either that of the Venetian Macao or the Sands, we expect the Four Seasons Macao to evolve into an ultra-luxury destination for Asia's aspiring wealthy and elite and appeal to a customer that prefers a destination where junket play is not the centerpiece of the experience.

We expect our market offering to appeal not only to residents of Hong Kong and Guangdong Province, but to wealthy residents in major metropolitan areas throughout Asia.

We plan to specifically target potential customers residing in Tokyo, Osaka, Taipei, Shanghai, Beijing, Bangkok, Jakarta, Kuala Lumpur and Singapore, among many other cities in mainland China and again throughout Asia.

Let me spend a moment on the Sands Macao.

The Sands delivered 53.2 -- I'm sorry, $52.3 million in adjusted property EBITDAR for the fourth quarter, and rolling volume of $6.1 billion was up 4% compared to the quarter one year ago, while mass drop was down.

The Sands does still, however, remain a leader in mass play in the Macao Peninsula, recording $593 million of mass drop during the quarter.

Our additional cost savings initiatives will further improve the Sands' cost structure, and we believe we can increase the property's cash flow generation capabilities as additional cost savings programs are executed.

So to summarize our Macao operations overall, we will continue to focus on the three objectives of managing the VIP business to minimize risk and grow direct VIP play; focus on utilizing our CotaiJet ferry service to drive mass and slot play, particularly at our Cotai Strip properties; and to continue to control our cost structure across the entire portfolios of properties here in Macao.

I would also like to mention that we have attracted some key management talent to our operations in Macao, with Len D'Angelo, who is here with me today, assuming the role of Senior Vice President of Operations for Asia.

Len has over 30 years of gaming industry experience, including direct experience in managing multiple gaming properties and marketing to Asian-based customers.

Len will be working closely with me as we manage our cost structures and enhance our cash flows here in Macao.

Now let me turn to my other part of my job, the development, and spend a moment or two on the ongoing developments of projects, the Sands Bethlehem in Bethlehem, Pennsylvania, and Marina Bay Sands in Singapore.

As Bill mentioned previously, on both of these projects, our plan is to market these and open these on time and on budget as a key component to our overall business plan as presented in November, and we are firmly dedicated to that objective.

Sands Bethlehem is targeted to open in late May or early June, and our construction and preopening activities are accelerating to prepare that property for opening.

We are actually beginning to install slots next week on the casino floor and are planning marketing activities to commemorate the opening in late May.

In Singapore, Marina Bay Sands is clearly a challenging development, with design elements that increase the complexity of the construction process there.

To date, we have completed more than 40% of the construction, and greater than 90% of the construction costs have been contracted and are subject to firm pricing.

Naturally, a project of this scope and scale will be subject to some degree of uncertainty tied to the level of complexity, but at this time we remain comfortable with both the construction budget and timeline.

We continue to redefine and refine our preopening and FF&E budgets, which represent less than 10% of the total cost of our development.

We are cooperatively working with the Singapore Tourism Board towards a targeted opening in the December '09/January '10 timeframe.

That is basically the story on both developments.

But Matthew Pryor, our Senior VP of Construction here in Asia, and I are both here on the teleconference in Macao and would be pleased to answer any questions you may have about the construction process and opening timelines during the Q&A session.

With that, let me turn the floor over to Stephen Weaver, our President of Asia, who is also here with me today in Macao, to give you an update on our ongoing asset sales processes here in Macao.

Stephen?

Thanks, Brad.

As Bill mentioned at the outset, the successful monetization of noncore assets is the third component of our business plan.

We know the success of these efforts is an important driver of liquidity and will enable us to execute on our deleveraging strategy.

To that end, we will shortly be marketing shares in a cooperative structure that will provide the holders of the shares the exclusive use of a unit in the Four Seasons apartment hotel in Macao.

In addition, we're presenting our two retail malls in Macao to prospective buyers.

The Four Seasons share sales will be accomplished under the co-op structure we have previously announced, and our ability to utilize this method has been resolved in principle.

We expect in due course to receive any required further commissions or approvals from the Macao government to proceed with the sale of shares.

In terms of construction, the Four Seasons apartment tower will be completed in the third quarter of 2009.

And I'm pleased to report that the recent fires on the construction site that you may have seen reported in the press were small and well contained, that no serious injuries occurred as a result of them, and that the incidents did not materially impact our construction schedule.

While it is clear that residential property prices in the region have been negatively impacted by the weakness in the global economy, our discussions with interested parties, particularly investors we have targeted from Japan and Korea, have continued.

What we have on offer is clearly unique -- a one-of-a-kind opportunity to own shares in an entity that will provide the holder of the shares the exclusive right to the use of a Four Seasons apartment hotel unit on the Cotai Strip.

We're now beginning the process of converting expressions of interest to definitive share purchase agreements, which will require 10% of the price of the shares as a nonrefundable deposit.

Based on our feedback to date, it appears the terms of the share purchase contracts have been accepted in principle.

While we're certainly encouraged by the continuing interest from high-net-worth buyers, the real test will come over the next couple of months as these buyers proceed to definitive share purchase agreements.

With respect to our monetization of our retail assets, the Grand Canal Shoppes at the Venetian Macao and the Shoppes at Four Seasons Macao, we have been pleased with the genuine interest from a number of serious potential buyers.

Even in the current economic climate, these buyers understand the value inherent in these [property] assets.

Well-capitalized companies that possess the financial strength and liquidity to complete strategic acquisitions recognize that these assets present a unique opportunity to gain retail exposure to a growth-oriented destination with significant upside potential.

Additionally, the opportunity to purchase assets of this type in Asia is exceedingly rare, as major Asian mall developers typically develop retail properties and retain them for their own portfolios.

We expect to benefit from the simple fact that premium malls in Asia are tightly held and rarely offered for sale.

We expect to receive initial proposals from prospective buyers in the March to April timeframe.

With that, I will hand the call back to Bill.

Thank you, Stephen.

Back here in Las Vegas, we have attracted additional key management talent to our corporate office.

Joining us on the call, as I mentioned earlier this afternoon, are our new CFO, Ken Kay, and our new General Counsel, Al Gonzalez.

Ken possesses greater than 30 years of professional experience, including having served as CFO at a number of Fortune 500 organizations.

Al Gonzalez additionally brings more than 30 years of professional experience to Las Vegas Sands, including General Counsel for Fortune 500 organizations.

And we look forward to their contributions.

The next contribution, certainly, is that from Kenneth Kay.

He will be providing you with an update to our liquidity and capital resources.

Ken?

Thanks, Bill.

As of December 31, 2008, we had approximately $3.2 billion of cash and cash equivalents on the balance sheet.

In addition, we had approximately $1.9 billion of availability under our undrawn credit facilities at current exchange rates, principally through our Singapore credit facility.

So together, we have approximately $5.1 billion of cash, cash equivalents and sources of liquidity.

The usage for that $5.1 billion include approximately $2.5 billion of capital expenditures, preopening and FF&E costs to the projected opening dates of our Marina Bay Sands, Sands Bethlehem and Four Seasons Macao projects and approximately $600 million for the suspension of Sites 5 and 6 in the St.

Regis condo tower.

Total debt is $10.5 billion, of which no significant maturities occur until May 2011, when approximately $700 million related to our Macao revolver come due, and then in May 2012, when our US revolver is due.

In addition to not having near-term maturities on our outstanding debt, the cost of borrowing is quite low, with a current weighted average rate of approximately 3%, which reflects a healthy reduction from the weighted average annual rates of 6.1% and 7.5% in 2008 and 2007, respectively.

So it is important not to lose sight of the advantages inherent in our debt.

It is long dated, has very narrow spreads and provides us flexibility to allocate cash to our various developments.

With that, I'll turn the call back over to Bill.

Before we go to Q&A, let me sum up and reiterate a couple of important points.

We are singularly focused on the successful execution of our business plan.

That plan is fairly straightforward.

Our objectives include maximizing cash flow from current operations, delivering Bethlehem and Singapore on time and on budget, and generating liquidity through the modernization of our noncore assets.

While we cannot control the economic environment, we certainly can control our costs.

While the environment is difficult in both of our markets, we're generating significant cash flow from our properties.

We also enjoy the competitive advantage of having both very high-quality assets and differentiated operating strategies in both of our market places.

Our assets have broad appeal across customer segments, and our refocus on the group business in Las Vegas and on the mass business in Macao leave us less vulnerable to the weaknesses in the markets than many of our competitors.

And if the economic and operating environments continue to weaken, we will seek to further reduce our costs and to implement additional contingency plans.

We are realistic about how difficult the coming year may be, but our management team remains focused on the successful execution of our plan.

And we are focused and dedicated to managing through these challenging economic conditions and on successfully delevering to preserve the long-term value inherent in the successful execution of that plan.

And with that, I will now open the conference call to your questions.

(Operator Instructions).

Joe Greff, Wachovia.

It's close.

It's Joe Greff from JPMorgan.

Rob, you had mentioned that the group nights for the first quarter looked pretty good in Las Vegas.

Can you go beyond the first quarter?

How does the second, third, fourth quarter look?

Softer, Jeff.

The first quarter looks pretty good year on year.

Obviously, the economy has affected us.

The most recent national headlines haven't helped.

And we still see our group business to be a strong part of our overall -- an important part of our [segment] mix.

But it is not as -- year on year it will decline versus 2008 in the second and third quarters.

I can't speak to the fourth quarter yet, hoping it will rebound.

The second and third quarters are going to be more challenging than the first quarter was.

Okay.

And then, Brad, you talked about Singapore clearly challenging, and with different design elements, what is the most recent construction cost, all-in cost for Singapore?

Well, the construction cost is consistent with what we have announced previously, and it is $3.5 billion.

Of course, we actually pay for the job in Singapore dollars, so it moves around in terms of Singapore dollars on the exchange rate.

But it is consistent with what we have been saying all along.

Matthew has done an excellent job, and his team, in terms of keeping that thing under control.

And we have ebbs and flows.

Some things come in significantly under and some are over.

The good news, I think, for us going forward is, even what remains to bid out, and Matthew can comment on this as well, is stuff that is not commodity-based, so you don't have the commodity risk.

And it is also finishes and things that many contractors can form.

There's very few people who can build those towers.

There's probably only two contractors in the world, so you have a limited market.

Going forward, those things which remain to be bid out are very broad in terms of markets that we can go to in terms of contractors.

Yes, it is a lot of fitting out, obviously a lot more -- a lot of the last packages to buy out are fitting out, and there's a lot of competition in those packages in the market.

We are seeing very competitive returns on bids for those packages.

Okay.

And touching on your asset monetization strategy, can you talk about your desire or your willingness and any kind of discussions that you may have had in terms of looking to monetize Sites 5 and 6?

We haven't really evaluated or thrown that into the basket of things to sell.

Those are core assets as we develop them.

The noncore portions of those as it relates to mall, for example, and/or any condominiums there would be spun off.

That was the original plan.

But right now, 5 and 6 remain as stored value, I guess you would say.

And as markets recover, we look to then restart those operations.

At a later date, we would then look to spin off those noncore assets, per our plan.

But I would refocus again on the fact that '09 is our focus, and that is our horizon.

And '09 is extraordinarily key.

And so we remain laser-focused on '09 and then the opening of Singapore.

And 5 and 6 are something that, as I say, represent stored value down the line.

Celeste Brown, Morgan Stanley.

First, could you tell us what your calculation is on your debt to EBITDA in both Vegas and Macao and the current covenant test for both credits?

One second.

Do you want it at the end of the year?

Yes.

Year end '08, right?

Yes.

Well, the covenant is around 7.5; requirements, we're at about 6.9.

In Las Vegas?

Yes.

The covenant is 7.5, and you said you're at 6.9?

Ben?

Ben has the number here in Macao.

For Macao, based on the [loan price, this is] 4.5, and we are achieving around 4.

Okay.

And then also a question relating to Macao.

Did you take any reserves for bad debt in the quarter?

Yes, we did.

We went through our reserves, and really even at the last minute we added some reserves.

The total reserve is about $10 million for the quarter.

$10 million more than normal, or--?

$10 million.

I mean, we're just ramping up our credit right now as we speak.

And $10 million was by far the highest we have done so for, and it's starting to reflect the volumes that we're seeing here, particularly in the directed play.

And sorry, just to come back to the covenant and the US, does that include all of the cash at the parent, that 6.9 times?

It doesn't include all of the cash.

It includes some of it.

What we contributed down at December 31 for the net debt test.

Okay.

But if needed, could you contribute more cash down?

Yes.

Steven Kent, Goldman Sachs.

A couple things.

One, could you just talk about -- Steve Wynn mentioned on his call that he was going to try and move prices up a little bit in February.

I know it is obviously early; it has only been a few weeks.

But maybe you could just give us a state of how things are going in January and February.

I think that would just be helpful.

And also, your cost saves of the $250 million or so, how much of that occurred in the fourth quarter?

And that is the run rate, but how should we think about it ramping up throughout the year?

Yes, it's Ken.

Let me address the cost saves.

With regard to the $250 million, in 2008, we realized about $100 million of that.

In run rate costs, as of the end of the fourth quarter?

So that would be actually realized.

And of that $100 million, about $45 million of that would have been realized in the fourth quarter.

So if you annualize that $45 million, you'd get to about $180 million of the $250 million that had been identified and executed on, with about $70 million more to go to get to the $250 million.

And of that $70 million more, I would say more than two-thirds of that has probably been identified and will be implemented in the next couple of months, with the balance remaining over the rest of the quarter.

And so that would take you to about $150 million of additional realized savings for 2009 over and above what we had realized in 2008, that $100 million, to get you to the full $250 million.

And maybe just staying on that for a second, other companies have comes up with cost savings programs and then even one quarter later, they found more cost saves.

It sounds like you are going down that path.

But you have been at, as you said, you've had experience of 30 years.

Is that -- you have only been there a few months, but are you starting to see that?

Do you start to see even more than what we're talking about today?

No.

I mean, we are working together as a team on this.

So it is not just my efforts over a couple-month period of time.

And collectively as a team, we're very focused in on cost reductions as a whole.

So our efforts in that regard will continue.

And as we make more progress on that in the coming months, we will update you on that.

And then, Bill or Brad, could you just give us a sense for what you're seeing just the past month and a half or so?

Well, in Macao, we look at Chinese New Year, and we're down slightly on a year-to-year basis in terms of volumes.

So we are seeing fairly steady business here.

The group business is going to be very challenging in Macao this year.

So we're continuing to look at our resource, such as our rooms, and putting them into -- similar to what we're doing in Vegas, supplying more rooms against the gaming market to drive gaming revenues.

We will also be going to the wholesale market as well.

It will be interesting to see post-Chinese New Year how things progress.

I mean, bookings here are very short term on the hotel side, so the visibility is going to really be dependent upon really what happens over the next couple of months.

But I think the important point for our properties is, one, we see the ability to ramp up the Four Seasons property, and we think that property will ramp up very well over the next several quarters as we launch some marketing initiatives against that.

At the Venetian, we remain somewhat insulated, certainly from the VIP business, and that business right now is very competitive.

I think there's going to be significant liquidity issues over here in Asia with junket reps.

That is why we talk about going after directed play and still being cautious in terms of credit issuance, because there will be less money available, we believe, in the marketplace for that particular customer.

So we're going to try and manage our way as best we can, as we always have, against that lower-margin segment of our business.

Fortunately, both the Sands in terms of its locational advantage and certainly the Venetian in terms of the type of asset it is at least has the mass market, and we see some really obviously good growth on the slots side of the business and some reasonable stabilization on the mass side.

So we're going to count on our core businesses, the mass play, the basic hotel product and other [at-play] revenue centers such as retail to insulate us from the very challenging competitive environment on the VIP.

And a lot is just going to depend on whether visitation stays up here in Macao and how the economy gets affected here.

That is what I would say on Macao.

Brad, it is probably also maybe worth mentioning that the IBS restrictions here in Macao restrict the travel for individual visitors.

And what we have seen is that there is an increase in group visitation, people coming on tours.

And based on our growth in visitation over the Chinese New Year period as compared to visitation being down from mainland China generally into Macao, it seems that we're benefiting more than others from that growth in tour group visitation, and we continue to enjoy strong visitation at the Venetian, obviously still impacted, as Bill mentioned earlier, by smaller spend per visitor.

Our visitation numbers that I think we have there, just for the Sands and the Venetian, are up about 15% year over year, from what we can see.

We actually did a little analysis at 14 days before Chinese New Year, 14 days after, year over year, and our visitations were up 15% during those time periods.

Great.

And then any color on Las Vegas, Bill?

It is Rob Goldstein.

I don't know -- I didn't hear the comment earlier.

You said the Wynn folks said they'd raise prices?

I didn't hear your comment.

Yes, essentially Steve Wynn said that he was going to try to push rate a little bit higher.

When?

I didn't know that.

Listen, we welcome any rate increases by anybody of our neighbors because they have been -- the offers are -- you all read the offers.

You see the marketplace.

I think the only segment there is opportunity to raise prices right now, from our perspective, would be in the group segment, because they are still -- it is opportunistic relative to the [FIT] wholesale.

The problem is that raising prices will, in the FIT wholesale, it's an extremely competitive market right now.

I welcome any of our neighbors to raise prices.

I don't see it happening -- until it starts happening as a segment, it can't happen with individual properties.

So right now, our opportunity in this first quarter is in the group segment to raise or to get better pricing relative to the other segment.

The FIT wholesale market is extremely competitive in Las Vegas right now.

Larry Klatzkin, Jefferies.

A couple questions.

One, Steve, for the co-op sales, what price per foot are you targeting?

Can you give us that?

We are still, on the expressions of interest that we have received, north of $700 or $800 a foot.

Really?

Okay.

Is it true that 1 Central has had some fall in pricing?

Based on reports and certainly our intelligence in the market, ordinary residential product here is very soft.

And so there is, I think as I mentioned earlier, there is definitely softness in the market.

I think what we are seeing is that in the target group that we are addressing here, primarily almost exclusively Japanese and Korean, they are seeing our product as being a completely unique offering, and I don't think they are comparing it to any other normal residential first-time product.

All right, that is a great price.

Brad, the property budget, could you just go over the budget for what you were coming in for in Bethlehem and what the timing of that would be?

And maybe also just timing of CapEx, Ken, for maybe first quarter versus the rest of the year?

Well, the project cost in Bethlehem is about $750 million, I believe, right now.

I don't have that number in front of me, but downscaled from the roughly $900 million.

And that is the deferral of the hotel product and the retail product in Bethlehem.

And that product, again, is -- we have reserved dates with the Pennsylvania Gaming Control Board for around the 22nd, 23rd of May to open that property.

So that is our goal, to get that property open at that point in time.

And then how about CapEx for first-quarter spending on everything versus the rest of the year?

Ken, do you have that number there?

Yes, first quarter is approximately $750 million.

Okay.

And for full-year CapEx, would you have a number like that, or is it just too early to give us something for that?

Yes, it is a little bit early on that.

We're still working through the (inaudible -- microphone inaccessible).

All right.

And then, as far as -- I guess the best thing to say is give up on the commission caps, or is that not a dead issue, Bill?

It is not a dead issue.

We are operating as if it is, but we are told that there is legislation moving through the legco.

So we are expecting the worst, hoping for the best, and operating as if it is not going to change.

Okay.

And then the one issue, the way that Congress is going with comments about Vegas boondoggles and stuff like that, is there something that the industry -- I mean, I know it has to be more than just you guys.

I know some of the Wynn executives made a comment this morning, but anything about trying to point out that Vegas is a cheap place to go and try to get that sending people to Vegas is a way to save money, not a way to do a boondoggle?

I think -- Larry, it's Rob -- Andrew's comments were right on this morning.

He's right; this place is a wonderful opportunity.

It's priced effectively.

It is silly to position Las Vegas as a boondoggle, since it's the preeminent meeting place in the country today for business.

It is just an unfortunate mistake people make that comment.

I think we as an industry need to get together.

And there's discussion among different properties and different hotels about doing just that, how to have a unified response, because clearly it is not reality.

And it is a wonderful place to do business, has been, and we second what Andrew said.

I think it is obvious that this is going to be the leader in the future in business.

And we will deal with it as an industry.

All right.

There is plenty of communication with Harry Reid from this part of the country, talking about let's try to help rather than hurt your home country here.

Okay, well, that is good.

Guys, could you just go over the option grants that came out yesterday?

I assume that means we are looking at a happy team that is going to be staying for some long period of time?

That is a formulaic communication that grants options based on prices and Black-Scholes communications.

And I think you've heard from the conference call today, '09 is our focus.

And we are focused and dedicated to delivering our plan during that period of time.

Good.

That is all we can ask for.

And I guess, Ken, the covenant is 7.5 times.

How does that ramp for the year?

Does that ramp down throughout the year?

Yes.

In the first quarter it goes to 7, stays that way through the second quarter, and then ramps to 6.5 in Q3 and stays that way through the balance of the year.

[50 deeps] in each market, Larry, every six months.

Okay.

So the same for -- the Macao goes to 3.5 by the end of the year?

Yes.

Okay.

All right.

And then, for the September covenant, you anticipate -- obviously, if you're selling assets at all there is no problem at all, but any other ways to shore that up?

Would you buy bonds at a discount to book some additional EBITDA to help that?

Most assuredly, all of those possibilities are on the table, and we have had in-depth discussions.

I call it in the process of trying to make way for those possibilities.

Robin Farley, UBS.

I wanted to clarify a couple of things.

On the last call, you talked about the costs of suspending Sites 5 and 6 being $880 million spread between, starting in Q4 of last year, going through Q2 in 2010.

I wonder if you could just clarify, I guess, is the suspension, is still temporary, or at this point are you considering it an indefinite suspension?

And if so, how much of that $880 million have you spent and how much more is there to go?

And does the $880 million go up if in fact it is now an indefinite suspension?

Well, the $880 million we talked about was for the worst-case scenario called the termination.

The way our contracts work over here, we have six months to go through a suspension, see if financial markets change, etc.

Obviously, we are about three months into that suspension.

And there is a likelihood that it will either go to termination or we will negotiate additional suspension periods with our contractors.

But the $880 million was a worst-case scenario.

It is our belief now -- Matthew and I met this week -- that we can probably do better than that $880 million under a worst-case scenario.

And the money in that worst-case scenario goes out for a fairly long period of time, beyond what I would consider an event horizon related to some of the challenges we have from a liquidity standpoint right now.

So summation is, we're moving towards at least hitting that point where we have to determine the termination or additional suspension.

The $880 million that we talked about was worst-case.

We think we're going to do reasonably better than that.

The amount spent to date is probably I'm going to guess in the range of $350 million of that.

Again, a large chunk of that $880 million that we spent initially was just current payables, you know, paying for work that was already put in place.

So we're mindful of that being an opportunity to manage through creating additional liquidity and less strain.

And like I said, at this point in time, it is our belief that we will, under our worst-case scenario, will do better by a reasonable amount than that $880 million.

Okay, great.

And then on the ferry service, it looks like that has very beneficial to the Venetian Macao property.

And it looks like a loss of $4 million in the quarter.

I guess I'm just trying to get a sense of the real full expense there, that $4 million loss in the quarter.

I'm assuming that some percent or a large percent of the tickets are comped in one form or another.

Does that expense of the comped tickets actually show up at the property operating expense rather than at the ferry service level?

The ferry service, we charge.

It is in a different company, and we charge those costs back to the properties.

There is an allocation process, although the cost is somewhat discounted from the face value retail cost.

So the properties get charge for the usage on a discounted basis, and the ferry company subsidiary receives the revenue on that discounted basis.

The discount that Brad talks about, really we charge the casino business a fare that is at or slightly above the fare we sell wholesale tickets to travel agents, for example.

So it is a market-driven pricing structure.

The other, I guess, important notes on the ferry is that we're ramping up the frequency of service and getting higher utilization out of our ferries.

And we expect, with City of Dreams coming onstream at the middle of the year, that there will be more tickets sold as more visitors choose the Cotai Strip as their primary destination here.

We are also benefited by lower fuel costs, so our run rate costs are actually reducing in that business.

No futures, hedges?

No hedges.

And actually, can you just give us a ballpark, then, of what amount is charge to the property in the last quarter?

What was charged to the property for ferry tickets?

Yes, we can give you that.

We actually have that number someplace here.

Okay.

What's the relative share of those?

What is it there?

About $12 million.

Okay, great.

And then the last question is, there may be more (technical difficulty) the start of the call, but it looked like there was a charge of about $38 million related to marketing activities in Asia, some kind of a write-down for marketing activities in Asia.

Can you just give a little more color on what that was?

Really, the write-down of investments that we have made within Asia that were geared towards additional business development activities.

So we decided at the end of the year to really take a valuation reserve against those investments.

I'm sorry, your response was just cutting out a bit there.

It was difficult to hear.

What I'm saying is we had made certain investments with regard to business development activities within Asia, and that at the end of the year, in assessing those, we decided to take a valuation reserve against those investments that were primarily geared towards business development activity.

For example, Hengqin Island is one example of that.

Okay.

Is most of that $38 million Hengqin, or is that the biggest piece of that, or was it closing marketing (multiple speakers)?

It is purchases -- purchase of a building that was going to be one of our development activities in Beijing.

The Beijing property market is down, so we took a charge against the resale of that, not a decision to dispose of that asset, for example.

Celeste Brown, Morgan Stanley.

Sorry to beat a dead horse, but coming back to the US covenant, first, did you use another cure in the fourth quarter?

No, we didn't use a cure in the fourth quarter.

We would only use that in the third, and we have been clear about our intention to use the cure every other quarter so that we will have $100 million of incremental EBITDA for the calculation.

And just to clarify, at the fourth quarter, without the cure, we had $431 million of calculated run rate EBITDA for the test.

With another $50 million from the cure in the third quarter, that gets you up to $481 million of EBITDA run rate for the fourth quarter in the United States.

And we did contribute down about $2.2 billion of cash.

So of the $3.1 billion -- or around $3 billion in cash that we've got on the balance sheet, we did have $2.2 billion of that down for the calculation at the fourth quarter.

And if you run through all those numbers, you get to a 6.2 test versus a 7.5, or a 6.2 performance against a 7.5 test.

Not to 6.9?

I went back and looked at it.

It's 6.2.

I was using a -- 6.9 was before some of the cash that was pushed down.

So I think 6.2 is more accurate.

Okay, great.

Thank you so much for clarifying that.

Bill Lerner, Deutsche Bank.

I just have one question.

Larry asked all 16 of my backup questions.

So just one follow-up, really, on -- just kidding, Larry -- to follow up on Celeste's covenant questions.

So obviously, it is sort of the white elephant in the room, and with cash flow declining in Vegas, no visibility or not much visibility, and tightening covenants going forward, when you use the cure, when you contribute Pennsylvania, obviously there is still I think going to be some risk that you will breach this calendar year.

So can you guys color in the source of some of the ammunition that you have beyond the cure and contributing Pennsylvania?

I mean, you talked about the sale of an asset in Macao.

We understand that you can only bring back 25% of the proceeds of that to pay US debt.

So maybe you can talk a little bit about that.

Then maybe there's covenant relief to some degree as an option.

If it is, maybe there is an opportunity -- although I hope not -- to raise capital going forward.

And I don't know if Sheldon is on the line, may want to contribute to this.

Well, first of all, we run a bunch of our models on a bunch of our downside cases and looked at operating performance and are seeking other ways of reducing costs to be able to then create and develop covenants.

Yes, if we sell assets in Macao, depending upon the category of assets, 75% of those go to pay down Macao debt; 25% of those would then pay back debt that parent has to Macao.

So in essence, all of that delevers Macao, although some of it flows back to parent by delevering Macao.

That also opens some baskets.

So there's some other advantages, shall we say, to the lowering of debt there in Macao.

So it is not simply the 25%.

It just also creates some flexibility for us also.

But there are other asset classes there in Macao to explore.

So we are exploring every opportunity and option for creating liquidity and focusing further on reduction of costs here.

Again, we are mindful of the squeeze as the stepdown takes place and mindful of what is required here in terms of the multiples as it relates to our covenant test.

Okay.

Is Sheldon on the line as well?

I don't know.

He was in and out.

He was on earlier.

He may have dropped off at this point.

Ladies and gentlemen, we have reached the end of the allotted time period for questions.

Mr.

Weidner, do you have any closing remarks?

Just some quick closing remarks.

Again, we appreciate the exchange and we appreciate the questions.

There is no doubt that we know exactly what it is we have to do, and we are focused on doing that.

We are not naive about the environment that we are in.

We recognize what it means to us and what it means to the Company and what it is that we have to do.

And all of us are focused, whether it be in Macao or here in Las Vegas, on what has to be done, and we're dedicated to doing it.

And with that, we appreciate your attention on the call and look forward to the next quarter's call and updating you on the progress and several things that we've laid out to you today.

Thanks again, and have a good day.

This concludes today's conference call.

You may now disconnect.