Crown Resorts’ credit rating may be downgraded, analysts say

Crown Resorts received a US$6.36bn offer from The Blackstone Group Inc. in January.
Crown Resorts received a US$6.36bn offer from The Blackstone Group Inc. in January.

Analysts at Fitch Ratings have said that Crown Resorts’ credit rating could be downgraded several levels due to its new owners’ comfort with higher debt levels.

Australia.- Crown Resorts could see its credit rating downgraded if Blackstone Inc‘s acquisition of the company goes ahead. Analyst at Fitch Ratings say their assessment, based on Blackstone’s history in the US gaming industry, suggested is that the fund is happier with higher leverage than traditional operators.

In February, the board of Crown Resorts Ltd has unanimously backed investment firm Blackstone Inc‘s offer to acquire all the shares of Crown Resorts in a deal that values the firm at AUD8.9bn (US$6.36bn). Blackstone Group had increased its offer from AU$12.50 (US$9.11) to AU$13.10 (US$9.55) cash per share in January.

Fitch said it had conducted a scenario analysis of the impact of separating Crown’s gaming operations from its real estate assets, a model commonly used in the United States but not yet seen in Australia. They predicted the gaming operation’s adjusted net leverage for the financial year ending in June 2024 would be 5.6x-7.2x.

Fitch Ratings stated: “This is above the 3.0x trigger above which we would take negative rating action. We expect that in this scenario, any rating action would result in a multi-notch downgrade, as such leverage levels are more commensurate with the metrics of ‘B’ category rated gaming issuers or below, depending on leverage within the property company.”

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