Crown Resorts Faced A New Challange

Article by : Helen Feb 9, 2021

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Crown Resorts has been regarded as one of Australia largest entertainment groups. It provides diverse hotels, restaurants, gaming facilities, and integrated resorts in general. However, according to the latest news, Crown Resorts starts leaning back and is getting rather a bad rap. Credit rating agencies started making negative conclusions about the company after the rumors about machine interfering, money laundering, and staff mistreatment. As a result, Crown Resorts is not respected by most people as it used to be in the past. The company stated that it might lose plenty of dough if the credit ratings don’t stop dropping.

In November 2020, Crown was taken to Baa3 by Moody’s, which was is a strong blow to the company’s reputation. Bonds with Baa3 are considered “investment-grade,” but those that are one step lower are usually called “speculative,” “junk,” or “high-yield” bonds. It was reported that the Crown might be forced to pay around $135 million (AUD 175 million) in case agencies won’t stop downgrading the Crown’s ratings. In addition, Crown Resorts is still suffering because of an inquiry established by the New South Wales (NSW) Independent Liquor and Gaming Authority (ILGA), which may lead to a loss of a casino license.

While Moody’s gave a company a rate of Baa3, Standard&Poor’s (S&P), as well as Fitch, took it to BBB, and it is two steps below “high-yields.” Crown holds the debt of $135 million that is considered as medium-term notes (EMTN) that belong to an investor from Japan. For this reason, Moody’s didn’t take into account the debt and therefore didn’t change the rating.

The notes’ holder will be able to ask for repayment once both S&P and Fitch list the debt as junk or withdraw the ratings at all. It is said that Crown Resorts possesses enough money for the repayment of such debt, meaning there is a hope that it can handle the other projects.

The further development of other projects remains unclear as far as it depends on the NSW inquiry and a report handed by Patricia Bergin, the judge who conducts the inquiry. According to Moody’s, the result of the investigation has a direct bearing on the future of Crown Resorts. “We also view there to be an increased likelihood of material downside implications from the escalating regulatory investigations Crown is facing. These could include large fines and/or changes to Crown’s licensing conditions in Sydney, with license loss being the most severe, although still unlikely, outcome. ILGA’s review also raises the potential for regulators of Crown’s operations in Victoria and Western Australia to undertake their own reviews, with possible negative consequences for Crown’s business in those states,” claimed Moody’s in November 2020.

Currently, Crown believes that its debt might be reduced if selling apartments in Sydney’s harbor is successful. The company had to borrow $450 million last year to complete the Barangaroo construction, and it must repay the money by the end of 2021. Nowadays, the company managed to receive $220 million from this construction.

It was expected that Crown Resorts would be able to open its casino property at Barangaroo before Christmas. However, it wasn’t allowed to open the doors until 1 February, and only restaurants and bars became available for visitors. After the second fiscal semester of the previous year, Crown Resorts stated it had $112.18 million in Loan Capital.