Blackstone Takeover Could Help Crown Open Sydney Casino

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An offer by Blackstone to acquire all the shares in Crown Resorts could help the Australian operator meet the requirements set out by a NSW regulator to proceed with the opening of its Sydney casino, according to a release by Fitch Ratings.

GGR Asia reports that the ratings house suggested that an offer “similar” to Blackstone’s but from another party, could also “aid Crown’s remediation”.

Consolidated Press Holdings holds James Packer’s stake in Crown Resorts, currently the largest single interest in the casino firm, amounting to a 36 per cent stake.

Fitch added that two other state-level Australian regulatory probes into the casino operator “loom large”.

In Australia, casino regulation is done at the state rather than the federal level.

The ratings institution in November assigned a “rating watch negative” assessment to its ‘BBB’ rating for Crown Resorts “to reflect the various regulatory risks facing the company”.

BBB ratings indicate that expectations of default risk are currently low.

The capacity for payment of financial commitments is considered adequate, under that rating, but “adverse business or economic conditions are more likely to impair this capacity”.

Crown Resorts said in a filing to the Australian Securities Exchange it had received “an unsolicited, non-binding and indicative proposal” from Blackstone that valued the casino group at about A$8.02 billion.

Fitch said that a Crown Resorts’ management operating under Consolidated Press’ watch, had been “identified as a source of significant corporate governance lapses” by a report issued in FEbruary by a regulatory inquiry in New South Wales.

The probe, commissioned by the state’s Independent Liquor and Gaming Authority, found that Crown Resorts was unsuitable to operate a casino it had intended for a new Sydney hotel and real estate development at Barangaroo, Sydney.

The first 19 recommendations mentioned in the inquiry’s report, was that the state’s Casino Control Act needed a fundamental change.

This was that it should be amended “to include an additional object of ensuring that all licensed casinos prevent any money laundering activities within their casino operations”.

One of the outstanding regulatory probes is a royal commission in Victoria, where Crown Resorts runs Crown Melbourne.

That royal commission commenced on March 24, while another royal commission in Western Australia is expected to commence soon thereafter.

“It remains crucial that the company continues its remediation process to address all the regulators’ concerns, particularly amid royal commissions in its two main operating jurisdictions,” Fitch said.

“The Victorian regulator has set August 1, 2021, to report its findings, which could have an impact on Blackstone’s or other offers.”

According to Fitch, were Blackstone’s proposal to proceed, it would be “subject to lengthy probity and other regulatory checks” and it would have to be “deemed suitable to operate casinos by three different regulators.”

Fitch Ratings reports on Asia-Pacific casino recovery

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The casino gaming sector will improve in 2021 after the impacts of the coronavirus pandemic, according to a new report from Fitch Ratings.

GGR Asia reported in November that the analysts said gaming markets more reliant on local visitation will continue to recover faster, adding that any effects of the on-off closures due to local virus infections were likely to be “less active in 2021”.

Availability of vaccines would “allow destination markets like Singapore and Las Vegas to begin recovering more in earnest in second half 2021,” the ratings paper said.

The credit assessment institution also noted that cost cutting by casinos had meant that the impacts of the pandemic had been offset by healthy balance sheets.

Fitch Ratings said it maintained a negative outlook for a majority of its “rated gaming universe” because of the pandemic’s severe impact to casino operators and uncertainty regarding the sector’s recovery trajectory.

Discussing jurisdictions in the Asia-Pacific, Fitch noted that for the Macau casino market, although the city had an almost universal quarantine-free travel bubble with mainland China, current continued travel restrictions between Hong Kong and Macau were a “headwind”.

The institution said it was forecasting monthly revenue declines of 50 per cent to 60 per cent, year-on-year, through the first half of 2021, with accelerating growth in the second half, “led primarily by the premium mass segment.”

Fitch Ratings noted: “The eventual easing of travel to Hong Kong and potential availability of a vaccine drives our assumption for a strong second half 2021 performance relative to first half 2021.”

The financial institution observed that while Macau’s current six gaming licences expire in June 2022, the city’s chief executive Ho Iat Seng had a “multi-year extension option” in relation to the current rights.

“Fitch continues to believe the concession rebid process will be pragmatic,” said the credit rating agency, referring to an anticipated new public tender associated with the expiry of the current Macau gaming rights.

William Brown

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