Moody’s downgrade to cost Crown Resorts US$1m a year
The agency downgraded Crown’s notes after New South Wales’ regulator told it to delay opening its new casino in Barangaroo.
Australia.- Crown Resorts has received more bad news as a downgrade in its credit rating from Moody’s ups interest rates on its financial notes.
Moody’s Investors Service downgraded Crown’s issuer rating from Baa2 to Baa3 and kept the rating under review following the decision to delay the launch of gaming operations at is new casino in Barangaroo.
In a filing to the Australian Securities Exchange (ASX), Crown said there will be a resulting increase in interest costs on its Euro Medium-term Notes of approximately US$1m a year.
The firm said: “A further downgrade would entitle the noteholder of Crown’s Euro Medium-term Notes to elect to redeem the notes with a make whole.”
Moody’s took its decision after the New South Wales Independent Liquor and Gaming Authority (ILGA) requested to delay the beginning of operations at Crown’s new casino, which it had planned to launch on December 14.
The regulator said that there were concerns over the company’s suitability to run the casino after evidence of “extremely concerning” behaviour emerged at its hearing into the operator’s conduct.
The ILGA is set to make a decision by February 21 on whether Crown is suitable to keep its licence for the new casino.
Maadhavi Barber, an analyst at Moody’s said in the note attached to the filing: “The downgrade reflects our opinion that there is an increasing likelihood of material downside implications from the escalating regulatory investigations Crown is facing.
“In particular, the review will focus on the potential for further material negative outcomes that could not only affect the license for Crown Sydney, but could also bring forth regulatory challenges to Crown’s other licenses.”
Moody’s believes Crown could face large fines or changes to its licencing conditions, or even the loss of its licence for the Barangaroo casino.
It also expects Crown’s earnings from gaming operations will remain weak in the fiscal year ending June 2021 due to the pandemic.
The agency said: “The impact of job losses and asset price declines may continue to weigh on discretionary consumer spending even after current virus containment measures are phased out, and it remains uncertain how quickly consumers will again be confident to gather in public.”
It said the company’s outlook could be upgraded if the operator was found suitable to keep its casino licence or it takes action on recommendations made by regulators.
Crown recently decided to end all junket operations unless the companies were approved by state regulators.
