Crown Resorts is definitely no longer the jewel of the Australian gaming scene and can no longer expect to receive the same level of respect that it had one enjoyed. Tales of money laundering, war criminals, employee mistreatment, machine tampering and more have hobbled the once-great empire and most people believe that it is now on its knees, begging for mercy. It is asserting that it is at risk of having to give away massive amounts of money if credit ratings agencies don’t ease up; however, the agencies are only reaching their conclusions based on the company’s actions and inactions.
The Guardian reports that Crown could have to repay over AUD$175 million ($135 million) if the agencies continue to mark down the company. Moody’s took Crown to Baa3 last November, which is just one step above being considered junk. The agency is also reportedly considering another push downward, given that Crown is still facing an inquiry by the New South Wales (NSW) Independent Liquor and Gaming Authority (ILGA) and its future status as a casino license holder is still in question.
Yesterday, it was announced that Moody’s wasn’t willing to rate the $135 million in debt that was offered as euro medium-term notes (EMTN). These notes have been held by Crown for more than 14 years and are thought to belong to a Japanese investor. Although Moody’s won’t touch the debt, both Fitch and Standard & Poor’s (S&P) have rated it, giving it a rating of BBB, which is only two levels above junk.
Should Fitch and S&P decide to follow Moody’s and either withdraw their ratings or list the debt as junk, that would allow the holder of the notes to claim repayment. That claim could potentially cover the face value, as well as interest that would have been paid between now and 2036, the year the debt would have matured. While Crown is believed to have the money to be able to cover the repayment, it would certainly impact its ability to work on other projects.
Those other projects could already be in jeopardy, depending on what happens at the NSW inquiry. Moody’s believes that Crown’s entire future depends on the outcome of the current investigation and asserted last November, “We also view there to be an increasing 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.”