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Moody’s downgrades Crown Resorts issuer rating after Crown Sydney opening delayed

Moody’s Investors Service has downgraded the issuer rating of Crown Resorts from Baa2 to Baa3 following last week’s decision by the New South Wales state regulator to prevent the company from opening its AU$2.2 billion Crown Sydney development in December.

As reported by World Gaming Insight, Crown last week agreed to postpone the launch of Crown Sydney upon request of the NSW Independent Liquor and Gaming Authority (ILGA) until the results of an inquiry into its suitability are published in late January or early February.

Moody’s has also downgraded Crown’s backed senior unsecured medium-term note program rating from Baa2 to Baa3.

“The downgrade reflects our opinion that there is an increasing likelihood of material downside implications from the escalating regulatory investigations Crown is facing,” said Moody’s analyst Maadhavi Barber.

“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 noted that Crown is still being investigated in both NSW and Victoria on allegations of money laundering and other compliance issues, and that “adverse outcomes from these investigations could potentially result in large fines and/or changes to Crown’s licensing conditions in Sydney, with license loss being the most severe, although still unlikely, outcome.

“Furthermore, the review will assess the potential for adverse regulatory actions in respect of Crown’s operations in Victoria and Western Australia,” it said.

While gaming revenues expected to remain subdued through the remainder of the June 2021 fiscal year on COVID-19 limitations – Crown Melbourne is yet to reopen its main gaming floor after closing in March – Moody’s said Crown is well positioned to withstand meaningful but short-term cash burn with leverage still low at 1.6x as of 30 June 2020.

In response to its issue rating being downgraded, Crown issued a statement of its own on Friday revealing there would be a subsequent increase in the interest cost associated with its Euro Medium Term Notes of approximately US$1 million per annum.

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